Small Business Loans Amid the Coronavirus
If you are a small business owner, you are likely facing substantial economic hardships during this time of a global pandemic. Most small businesses have had to shutter their doors, and their businesses have slowed considerably if not completely stopped. A glimmer of hope was presented when the federal government indicated that they would provide some economic relief to small businesses in the way of The Coronavirus Aid, Relief, and Economic Security Act (CARES), which provides emergency loans to small businesses under certain circumstances. Learn more about how this small business loan may benefit your business during this uncertain time.
The federal government signed into law the CARES Act which allocates $350 billion dollars to assist small business owners to help ensure that they can keep their employees working amid a global pandemic. This Act is also known as the Paycheck Protection Program and provides 100% federally guaranteed loans to small businesses. Additionally, it is possible that these loans may be completely forgiven, if borrowers continue to maintain their payrolls either during the global pandemic crisis or restore their payrolls to employees after the crisis is over.
Eligibility for CARES Act Loan
You may be wondering if your small business will be eligible for a CARES Act loan. The following are the eligibility requirements for this very unique loan during this very unique time.
- Business with fewer than 500 employees (full time, part-time, etc.)
- Small business that meets the Small Business Association’s (SBA) size standard
- 501(c)(3) business with fewer than 500 employees
- Sole proprietor
- Independent Contractor
- Self-employed that carries on any trade or business
- Tribal business that meets the SBA size standard
- 501(c)(19) Veterans organization that meets the SBA size standard
- Food services businesses under NAICS 72 (500 employees per physical location)
Good Faith Certification
The CARES Act will require an employer to state that the current global pandemic created conditions that makes the loan necessary in order to continue operations. The loan will be used to either make payroll or continue to make essential payments such as utility or lease payments. The employer has not applied for another loan, or received another loan for these same reasons. Additionally, if you are a sole proprietor, independent contractor or self-employed, the lenders will also look for additional documents indicating your expenses, income, payroll tax filings and other financial information.
How Much Can You Receive?
The calculations can be quite complicated, however, the maximum amount of a loan is 2.5 times the average total monthly payroll costs calculated from the prior year, not to exceed $10 million. There are several permutations of these calculations, and as a business owner, you may wish to seek professional legal advice regarding how to do these calculations. While a personal guarantee is not required for the loan, and collateral is not required for the loan, it is critical that a business owner calculate these payroll costs. Additionally, there are several specifications regarding what will happen if an employer brings back employees or restores wages.
Contact an Experienced Attorney
We understand that you may be struggling financially as a business owner due to the coronavirus outbreak. Contact the West Palm Beach bankruptcy attorneys at Kelley Fulton Kaplan & Eller today at 561-264-6850 for a consultation, and to help you understand your options during this global pandemic.