The CARES Act Update: Paycheck Protection Program

On Friday, March 27^th, 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.

Next Steps:

• Start here. The Coronavirus Emergency Loans Small Business Guide and Checklist, offered by the U.S. Chamber of Commerce, will help determine a company’s eligibility, spotlight the things at which lenders are looking, provide guidance on calculating monthly payroll costs, and explain what parts of the SBA loans can be forgiven.
   
• Begin the loan process as quickly as possible. Small business relief is sorely needed across the nation, and business owners will all be applying for a portion of that assistance.
  • Contact your current financial institution to confirm that they are an SBA-approved lender.
  • If your current financial institution is not SBA-approved, visit the SBA website to help with a lender match. This is a free online referral tool that matches businesses with approved lenders.
  • Relationships matter. Reach out to your LGT advisor for a referral to an SBA-approved lender.

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.