The Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act 
the “CARES Act”), which provides businesses and individuals impacted by the COVID-19 pandemic with extensive financial relief. House passage is expected to follow shortly. The Department of Labor also recently released much-anticipated guidance regarding the Families First Coronavirus Response Act in the form of fact sheets and Q&A’s, as well as notices and posters that employers are required to display in their businesses, all of which can be found here.
Portions of the CARES Act that will benefit small businesses include widespread expansion of SBA loans and many tax-related savings, credits, and deferrals:
Expansion of SBA 7(a) Loans. Businesses that have been affected by the pandemic and have 500 employees or fewer will be able to obtain SBA 7(a) loans equal to 250% of their monthly payroll (up to an annual rate of pay for each employee of $100,000), up to a maximum loan of $10,000,000. These loans may be forgiven to the extent they are used between February 15, 2020 and June 30, 2020 to fund payroll expenses, make interest payments on mortgages, or pay rent and utilities. The loan forgiveness will be reduced by any proportionate reduction in employees compared to the prior year and a 25% or greater reduction in employee compensation. The amount forgiven will be excluded from the business’ gross income. The loans will be non-recourse (no security or personal guarantee required), and bear interest of 4% with a repayment period of 10 years.
Expansion of Other SBA Loan Programs. The CARES Act will also expand existing loan programs offered by the SBA as follows:
- The maximum Express Loan will increase from $350,000 to $1,000,000. These loans provide borrowers with revolving lines of credit for working capital.
- Businesses affected by the pandemic can access Economic Injury Disaster Loans and obtain an advance of up to $10,000 within 3 days of application to maintain payroll, make debt payments, and provide paid sick leave. Businesses that receive a 7(a) loan under the CARES Act will not be eligible to receive an Economic Injury Disaster Loan for the same purpose
- The SBA will be required to pay the principal, interest, and fees owed on pre-existing SBA loans for six months, beginning with the next payment.
Tax Benefits. The CARES Act provides business with multiple forms of tax relief, including but not limited to refundable payroll tax credits, delay of payroll payments, changes to net operating loss carry back and limits, and roll back of net interest deduction limitation. We suggest you contact your tax advisor to determine what tax relief your business may be entitled to under the CARES Act.
If you have any questions about the CARES Act or the Families First Coronavirus Response Act, including how they may affect your business, contact us at (312) 216-2720 or firm@marcusboxerman.com.