On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act or commonly known as the “CARES Act.” The $2.1 trillion aid package will apply to different areas of the U.S. economy to minimize the economic effect of the ongoing COVID-19 pandemic.
AlvaradoSmith transactional attorneys Tom Zeigler and Jerry Ruiz have prepared a Q&A to inform business owners of the available resources and new programs within the CARES Act that will help address the needs of small business owners and nonprofit institutions.
What types of loans are currently available through the Small Business Administration (“SBA”)?
What is new for small businesses under the CARES Act?
What is the Paycheck Protection Program Loan?
Who Processes the Paycheck Protection Loan application and the EIDL loan application? How long will the loan application take to process?
Does my business qualify for the PPP Loan?
What can I use the PPP Loan funds for?
You must acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. Funds you use for other purposes will not be eligible for forgiveness. The funds can be used for:
How is the PPP Loan different from the Economic Injury Disaster Loan (SECTION 7(B))?
What are the terms of the loan forgiveness?
This is an unprecedented program, so anticipate changes based on upcoming regulations.
How is the loan forgiven?
In the eight weeks following your loan signing date, all expenses related to the following can be forgiven:
When submitting your application for loan forgiveness, current requirements state that you must provide the following documentation (no exceptions) (NOTE: This is subject to change as regulations are promulgated):
The lender must make a decision within 60 days of your forgiveness application submission.
What is the modified EIDL Program?
Can I access both the PPP and EIDL programs?
Possibly. Businesses that receive a PPP Loan cannot receive an EIDL loan for the same purpose. However, businesses that have an EIDL loan issued in 2020 in place may be able to refinance that loan into the PPP Loan, which becomes forgivable if the business has sufficient qualifying salary, utility, and rent/mortgage expenses.
Should I apply for PPP Loan or EIDL?
It depends on your circumstances, but the PPP will be beneficial in many cases if you anticipate that the funds will allow you to maintain your current payroll, especially as the loan is forgivable. It is a temporary program and only covers expenses through June 30, 2020. The EIDL existing loan program must be paid, but terms are flexible, and it covers injuries through the end of the year.
When will these programs become available?
What can I do now?
As this is a fast moving topic, please note that this post is current as of April 1, 2020. For additional information and questions, please contact AlvaradoSmith at 714.852.6800. You can email Tom Zeigler at firstname.lastname@example.org or Jerry Ruiz at email@example.com.
DISCLAIMER: The information contained herein is intended for informational purposes only and should not be construed as professional counsel or legal advice. Seek legal counsel for advice with respect to any legal matter. The information in this document may not reflect the most current developments as the subject matter is extremely fluid and may change daily. The content and interpretation of the issues addressed herein are subject to change.