On Friday, March 27, 2020, Congress passed the $2 trillion Coronavirus Aide, Relief, and Economic Security (CARES) Act. It specifically allocates $350 billion dollars to help small businesses keep people employed. This portion of the bill, known as the Paycheck Protection Program, provides 100% federally guaranteed loans to small businesses. And, if the loan is used within certain guidelines, the loan is forgivable.
We’ve created a quick overview below to help you understand the opportunity and if it might be right for your O&P clinic. As always, consult your accountant regarding the bill details and your specific situation.
What is the Paycheck Protection Program?
- A program that incentivizes businesses to keep employees on the payroll
- Provides 8 weeks of cash-flow assistance
- If used within guidelines, the loan is forgivable
Who can apply?
- Businesses with 500 or fewer employees; sole proprietors are eligible too
- Must have paid employee salaries and payroll taxes or contractors
- Waives the “credit available elsewhere” test normally applied
Who is handling them?
- Banks, credit unions, and other lenders who partner with the SBA
- It’s backed by an SBA guarantee
How much can I get?
- Up to 2.5x your average monthly payroll costs
How long will it take?
- The loans should be available as soon as this week
- Process will take as little as 24 hours
- For payroll costs, group healthcare benefits, insurance premiums, and interest on a mortgage or other debt incurred prior to February 15, 2020, and to make rent and utility payments
- Note, you can re-hire workers previously laid off and not be penalized
- Loan proceeds may not be used to prepay debt
- If you want the loan forgiven, it must be used for its intended purpose of payroll, mortgage, rent or utility costs
- As long as your business maintains the average size of its workforce,
- You will only need to pay back the interest accrued
- Principal effectively becomes a grant
- Otherwise, you’ll have 10 years to pay back the loan at an interest rate not to exceed 4%
For more detailed information on the Payment Protection Program, check out the following resources:
"Coronavirus Emergency Loans: Small Business Guide and Checklist" | U.S. Chamber of Commerce
“Applying for a small business disaster loan? What to know about the COVID-19 stimulus package” | Fast Company
"CARES ACT" | Senate.gov
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