Government Assistance Is Available to Help Businesses and Individuals
Almost all business entities and organizations are suffering financial losses from the coronavirus pandemic. All levels of government have adopted legislation to help address these economic harms. We are monitoring the new laws and regulations and can advise clients of all types as to their options. Please bear in mind that these laws and regulations are new and we anticipate further developments in the upcoming weeks.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. This Act includes a new forgivable loan program, Paycheck Protection Loans (“PPL”), to help small businesses retain their workforces. This program authorizes most business entities, as well as individual proprietors and 501(c)(3) non-profits, to obtain federally guaranteed forgivable loans payable over two years at 0.5% interest. The loan can be up to 250% of the business’s average total monthly payroll costs over the preceding year (but not more than $10 million). Any annual salary amounts in excess of $100,000 per employee are excluded from this calculation. The proceeds may be used to cover payroll costs (including health insurance premiums), lease payments, mortgage interest, and utilities. The loans are nonrecourse and some requirements applicable to other Small Business Administration loans are waived. PPL loans will be forgiven if all of the loan proceeds are applied to any of the above-listed expenses incurred or paid in the eight-week period after origination, with at least 75% of them applied to payroll. The forgiveness will not be treated as taxable income. The forgiveness amount will be reduced if the business reduces the size of its workforce or their salaries. For businesses, application forms for the loans are now available. Banks may start processing applications on April 3, 2020.
The CARES Act also updates the Small Business Administration’s Economic Interest Disaster Loan (“EIDL”) program to give businesses hit by the current crisis with ready access to funds and provides for advance $10,000 grants. It also provides for employee retention tax credits, subsidies covering six months of payments due on eligible SBA loans, accelerated depreciation of business property improvements, a temporary increase in deductible interest expense, and deferral of payment of some employer payroll taxes.
New York City is also offering a Small Business Continuity Loans program, which is making zero-interest loans of up to $75,000 available to smaller businesses that have fewer than 100 employees and have lost more than 25% of their revenue due to the coronavirus. Especially because participating in some programs may preclude or reduce eligibility for others, businesses and employers should consult with their counsel and accountants to assess the various programs’ suitability for their needs.