During this unprecedented time, Congress is focused on helping businesses withstand the disruption caused by COVID-19. The new CARES Act is a comprehensive legislative initiative designed to mitigate the impact of the pandemic on business and individuals. This act is historic for its broad scope and for the amount of governmental funding – $2.2 Trillion. It’s likely there is something here to help your business.
The programs in the CARES Act are administered by the U.S. Small Business Administration and are available on a first-come-first-served basis. So, it’s important to submit your application as soon as possible. If your bank participates in SBA lending programs, they can walk you through the application process.
The Paycheck Protection Program (PPP) is a forgivable loan for businesses and 1099 workers impacted by the pandemic. Key elements include:
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Up to 100% forgivable if employers keep paying their workers
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Employers can borrow up to 250% of their average monthly payroll
In general, loans will be forgiven as long as:
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The loan proceeds are used to cover payroll costs to retain employees or to make mortgage interest, rent and utility payments over the 8-week period following the loan and
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Employee and compensation levels are maintained.
The Economic Injury Disaster Relief Program provides for:
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A low-interest fixed rate loan of up to $2 million
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Loan may be used to pay immediate expenses during the emergency
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An advance of up to $10,000, awarded within three days of loan application. This advance can be used to keep employees on the payroll, to pay sick leave, to meet increased production costs or pay business obligations.
As part of the same package of legislation, the government has broadened the criteria for companies allowed to apply for expedited bankruptcy reorganization. For many companies, the new legislation makes bankruptcy reorganization applications easier and cheaper.
Your state’s Department of Commerce is also a potential resource for emergency grants and loans. Many states have financial assistance available for local small businesses.
This is only a high-level summary of available governmental resources. Reach out to your professional advisors for additional information, to verify whether these resources are a fit for your situation and to proceed with applications. We’re happy to recommend legal and financial resources with whom we have worked in the past, or to brainstorm ideas with you.
Our next Path Forward topic will be cash management strategies you can use to bolster your business. Look for it in your mailbox, and feel free to share it with your contacts.
Best Regards,
Lauren Pittelli