In support of our community, SCP is providing a collection of resources for businesses to utilize during the 2020 Coronavirus (COVID-19) pandemic.
CARES allows employers to pay their utility bills from funds obtained through a loan from their commercial lender backed by the Small Business Administration (SBA).
Under the act, federal, state, and local officials have pledged to make many resources easily available to help individuals and businesses affected by the COVID-19 (coronavirus) crisis.
Creates low-interest loans under the Paycheck Protection Program within CARES.
Eligible recipients include:
1) small business concerns;
2) sole proprietors, independent contractors, and eligible self-employed individuals who regularly carry on a trade or business and who would be entitled to receive paid leave pursuant to the Emergency Paid Sick Leave Act if the individual were an employee of an employer;
3) IRC Sec. 501(c)(3) nonprofits;
4) IRC Sec. 501(c)(19) veterans’ organizations;
5) Section 31(b)(2)(C) of the Small Business Act Tribal businesses,
(provided that they have) no more than 500 employees, along with provisions for NAICS coded 72 (accommodations and food services sector) with multiple locations.
Expanded to also, separately include 1099 independent contractors and gig-economy workers.
Loan amount based on payroll
The maximum covered loan amount is generally the sum of 2.5 times average total monthly payments for payroll incurred during the one-year period before the date of the loan, except that for seasonal employers, . . . but not to exceed $10 million.
Uses for funds
Allowable uses of proceeds may include payroll (salaries, wages, commissions or similar compensation of a U.S.-resident employee of up to $100,000 per year per employee on a prorated basis; cash tips or equivalent; vacation, parental, family, medical, or sick leave (other than qualified sick leave or family leave wages for which a credit is allowed under the Families First Coronavirus Response Act); allowances for dismissal or separation; group health care benefits including insurance premiums; retirement benefits; state or local taxes on employee compensation (other than employer’s share of FICA payroll taxes, railroad retirement act taxes, or other required U.S. income tax withholding at the source); compensation or income of a sole proprietor or independent contractor of up to $100,000 per year on a prorated basis), continuation of group health care benefits during periods of paid sick, medical, or family leave and insurance premiums; and interest on mortgages and any other debt obligations incurred before February 15, 2020, rent, and utility payments.
Certification and nonrecourse
Borrowers must certify that the uncertainty of current economic conditions makes the covered loan necessary to support ongoing operations, that the proceeds will be used to retain workers and make mortgage, rent, and utility payments and that the borrower has not applied for or received a duplicative covered loan for the same purpose. There is a funding cap.
Covered loans will not require collateral or personal guarantees and will be nonrecourse to shareholders, members or partners of the borrower except to the extent of the use of covered loan proceeds for non-allowable purposes. The maximum interest rate is 4%.
Borrowers are eligible for forgiveness of up to 100% of a covered loan under the PPP for the costs incurred and payments made by the borrower during an eight-week covered period after the loan origination date for (a) payroll costs (as defined and limited by Section 1102) and additional wages to tipped employees, (b) interest on any real or personal property mortgage incurred prior to February 15, 2020, (c) rent on any lease in force prior to February 15, 2020, and (d) utility payments for electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020. Amounts forgiven are considered canceled indebtedness under Section 7(a) of the Small Business Act and are not includible in gross taxable income of the borrower.
Links for more details and reference
Language & comments
Press Democrat: If businesses use 75% of the borrowed money to cover payroll costs and the rest on mortgage interest, rent, and utility payments over eight weeks after receiving a loan, they won’t have to pay it back.
Washington Post: Small businesses across the country are pouncing on the program. About 70 percent of 900 entrepreneurs surveyed said they tried to apply for a PPP loan, according to the National Federation of Independent Business. Of those, about three-quarters successfully submitted an application, with the rest reporting problems. Some entrepreneurs have had trouble finding a bank that will accept their application, in some cases because banks are limiting the loans to preexisting customers, according to the NFIB’s survey.
Small In its emailed statement, the SBA said the point of the program “is to put money in the hands of small business owners so they can, in part, keep employees on the payroll so they can make rent, pay mortgages, buy groceries and generally survive and participate in the economy." “For a business to take this cash injection from PPP and sit on it while their employees are at home being unpaid defeats the purpose and the spirit of the CARES Act,” the law that created the loan program, the SBA said. “All we are asking is that the employer use 75% of what is essentially free money to pay their employees for eight weeks.”
Essential business list Sonoma County