On Friday, March 27th, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the Act) passed the U.S. House of Representatives and was signed into law by the president.
The CARES Act is possibly the most sweeping economic stimulus package ever and is an ambitious and much-needed shot in the arm to a flagging economy hobbled by the coronavirus. Its effects will be felt for a generation. While we continue to dissect the Act and consider its implications for all of our clients, it is important to spotlight one of the most critical provisions of the Act: the Paycheck Protection Program.
The Paycheck Protection Program greatly expands eligibility for U.S. Small Business Administration (SBA) loans. Small businesses with fewer than 500 employees, businesses that otherwise meet the SBA’s size standard, not-for-profit organizations with fewer than 500 employees, individual sole proprietors and independent contractors, and a few others may apply with SBA-approved lenders for loans to be used for payroll-related expenses, mortgage or lease payments, and utility payments for their business. Loans are capped at $10 million and are based on a company’s monthly payroll, less some specific exclusions, multiplied by a factor of 2.5. Additionally, and perhaps most significantly, all, or at least significant portions, of the loan may be forgiven assuming the company meets certain criteria. The key drivers are maintaining payroll during the crisis or restoring payroll afterward.
LGT advisors continue to work through the Act to bring you useful, actionable advice to support your business and your family. Watch for further updates and visit our COVID-19 Financial Updates page often for the latest information.
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