The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed by President Trump on Friday, March 27, 2020. It is a comprehensive bill and there will be guidance from several federal agencies on how to interpret the Act in the next several weeks. The Congressional response to the COVID-19 coronavirus is continuing to develop and change as new challenges emerge. This is a summary of only a portion of the law that was passed on March 27, 2020. Every situation is different. Please consult with counsel to determine how these changes may impact you.
This information is being provided for your review and consideration. If you have any questions or would like additional information, please don’t hesitate to contact any of the attorneys at GPNA.
This is a summary of the provisions that provide small business loans through SBA-certified lenders.
Keeping American Workers Paid and Employed Act
There are four provisions in under this Act: (1) loans for general business expenses such as payroll and utilities; (2) loans for entrepreneurial development related to COVID-19, such as changing to telework and remote customer service; (3) loan forgiveness with some conditions; and (4) Economic Injury Disaster Loan. Each of these provisions are explained in more detail below.
Paycheck Protection Loans
Small businesses that were in operation on February 15, 2020, may be eligible for a loan to help cover certain payroll, rent, and utility costs. There are several limitations and exclusions that may apply. Please consult with counsel to determine if your business may be eligible for one of these loans.
The Act provides waivers of some loan origination requirements such as a fee waiver, the requirement that a small business is unable to obtain credit elsewhere, and the requirement for a personal guarantee or collateral.
This is available for businesses that have experienced, as a result of COVID-19, supply chain disruptions, staffing challenges, a decrease in gross receipts or customers, or a closure. Financial assistance may be available to provide education, training, and advising for challenges related to COVID-19. For example, funds could be used for managing and practicing telework or mitigating the effects of reduced travel or outside activities.
Loan forgiveness is available during the 8-week period beginning on the date the loan originated for the certain payroll, rent, and utility costs. As with the Paycheck Protection Loans, there are several limitations and exclusions that may apply. Most significantly, the amount of loan forgiveness will be reduced based on a reduction in full-time employees or a reduction in salary and wages of any employees. Please consult with counsel to determine how the loan forgiveness may apply to your business.
Emergency Economic Injury Disaster Loan (EIDL) grant
For the remainder of the 2020 calendar year, businesses with not more than 500 employees, nonprofits, sole proprietorships, and independent contractors can apply for an emergency EIDL. If the business meets the requirements, the business can request an advance on the loan of up to $10,000. Even if the loan is later denied, the advance is not required to be repaid, however, the advance will be used to reduce the amount of loan forgiveness available under this Act.
This is a summary of Title II of the Act as it provides unemployment relief for workers.
Relief for Workers Affected by Coronavirus Act
This Relief for Workers Affected by Coronavirus Act provides unemployment benefit assistance while an individual is unemployed, partially unemployed, or unable to work and not entitled to any other unemployment compensation between January 27, 2020 and December 31, 2020.
Who is covered:
Individuals who are not eligible for regular compensation or extended benefits under state or federal law.
Individuals who have exhausted all rights to regular unemployment or extended benefits under state or federal law.
Individuals who are able and available to work but cannot work due to circumstances directly related to COVID-19. Individuals who can telework for pay or are receiving paid sick leave are not eligible for unemployment under this provision.
The Act provides an additional $600 above the amount payable under state law.
Compensation is to be made without a waiting period.
Employer payment of costs:
Employer will pay the state ½ of the amount paid under the short-term compensation plan.
This amount shall not be used for purposes of calculating an employer’s contribution rate.
Lisa K. Cagle has provided the summary above. Please reach out to Lisa or other attorneys at our firm with any further questions.
Lisa K. Cagle
Lisa K. Cagle is an associate attorney with Gunderson, Palmer, Nelson & Ashmore, LLP in Rapid City, South Dakota. Lisa focuses her practice primarily on business and estate planning, real estate law, and employment law. Prior to practicing law, she worked as a teacher for eight years.