Last Friday, Congress passed, and President Trump signed into law, the Coronavirus Relief and Economic Security Act (CARES) which provides $2.2 trillion in assistance to businesses, individuals, and to state and local governments. Of the $2.2 trillion, $350 billion has been set aside for businesses under the Payroll Protection Program (PPP) as one of the economic incentives under CARES.
If you have not already talked to your banker to find out the details of the application process for the PPP, we would advise you to do so immediately as we believe banks will be accepting applications for most businesses beginning on April 3rd. Through the Small Business Administration, lenders will have the ability to make PPP loans to businesses with fewer than 500 employees. The amount of the PPP loan is based upon the lesser of (i) two and half times your payroll costs, including wages and certain benefits, for 2019 (payroll costs are capped at $100,000 per employee) or (ii) $10 million. The application process for the PPP loan is extremely streamlined, with limited documents and financial data required to be submitted to banks in order to qualify for the PPP loans. The PPP loans will not be collateralized and are non-recourse, with no personal guarantees required.
For the period beginning from the date of loan and ending eight weeks later, employers will be required to utilize the proceeds from the loan for: (i) payroll costs; (ii) interest on certain mortgage obligations; (iii) rent; and (iv) utilities. The amount of funds expended for these purposes will be forgiven by the SBA based upon guidelines to be provided by the SBA. Any debt forgiveness will be tax-free. For any remaining balances of the PPP loan, your banker will be able to provide two year amortization schedule and the interest rate shall be .5% per annum (penalty free prepayment is also an option). The most important requirement to qualify for any debt forgiveness is that the employer must maintain all full time and part time employees during the 8 week period.
Please let us know if you have any questions or need additional guidance regarding the Payroll Protection Program, after you have discussed the availability of a PPP loan with your banker and accountant, we would be happy to assist your business as you seek to deploy this unprecedented program to help your business move forward during the COVID-19 crisis.
Ann R. Starcher
Lewis Glasser PLLC
(O) 304.345.2000 (Ext. 1010) / (D) 304.414.9010
James M. Becker
Lewis Glasser PLLC
(O) 304.345.2000 (Ext. 1014) / (D) 304.414.9014
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This e-update is advertising material intended to provide addressees with informational updates and perspectives regarding matters of interest in connection with the COVID 19 pandemic. This e-update does not constitute legal advice, the provision of legal counseling or any other professional service, nor does it constitute a legal opinion regarding any specific facts. No attorney-client relationship is created by this e-update and this e-update does not constitute an offer to provide legal services.
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Lewis Glasser PLLC, 300 Summers Street, Suite 700, Charleston, West Virginia 25301