A Note from the CPA’s
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act contains many provisions for businesses and individuals, but the most impactful provision for small businesses in the immediate term is the Paycheck Protection Program loan.
The Paycheck Protection Program loan will provide up to $349 billion of federally guaranteed loans for small businesses. The loans are being issued by qualified SBA lenders (banks) and will be available until June 30, 2020, or until funds run out.
Businesses with 500 or fewer employees, which were operational on February 15, 2020, are generally eligible for 2½ times the business’s average monthly payroll over either the prior 12 months, or for 2019 (up to a maximum loan of $10 million). Some of the loan may be forgiven, and for the remaining debt, the interest rate will only be 1%.
The Paycheck Protection Program loans can be used for the following expenses:
- Payroll costs (up to $100,000 per employee);
- Group health coverage;
- Business occupancy costs (mortgage interest, rent, and utilities); and
- Interest on other loan obligations.
The loans may be forgiven for amounts used within certain requirements for these expenses during a specific eight week period after obtaining the loan. However, loan forgiveness will be reduced by reductions in employee compensation, or layoffs of employees during the period of February 15, 2020, through June 30, 2020.
Any loan amount that isn’t forgiven has a repayment term of 2 years, and an interest rate of 1%. No payments will be required for the first six months, though interest will continue to accrue during that time.
We suggest that you reach out to your existing banking institution to determine whether they are a participating lender and work with them to get an application into the system.
As a final note, businesses receiving Paycheck Protection Program loans are ineligible for the Employee Retention Credit, which is a new credit available to small businesses under the CARES Act.
It is important to note that the rules for this program and other programs are changing constantly. We hope that you can take advantage of assistance if needed. There are many other provisions to assist taxpayers and we are available to assist you going forward with this and other needs you may have.
All the best!
Alyson Pattie, CPA 818 297-1244 firstname.lastname@example.org
Charles Schwager, CPA 818 274-5983 email@example.com
Be sure to let them know you heard about them from GMS!