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CARES Act – Summary and Guide for Small Businesses

CARES ACT Benefits for Small Business

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses. Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

Bizfundfinder.com and Foresight Business Funding do provide SBA(7) loans for Businesses that need working capital or Business Real Estate. If you need business loans or funding under The CARES Act or SBA disaster relief program, we likely can not directly assist you. If you have general questions, or would like to know your financing options, feel free to contact us or call (317) 589-0118.  Many of our lenders are funding, especially Preferred SBA Lenders are funding as usual for most industries.

ARE YOU ELIGIBLE UNDER THE CARES ACT?

You are eligible if you are:

  • A small business with fewer than 500 employees
  • A small business that otherwise meets the SBA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates as an independent contractor
  • An individual who is self-employed who regularly carries on any trade or business
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard

In addition, some special rules may make you eligible:

  • If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply

REMEMBER: The 500-employee threshold includes all employees: full-time, part-time, and any other status.

WHAT WILL LENDERS BE LOOKING FOR?

In evaluating eligibility under The Cares Act, lenders are directed to consider whether the borrower was in operation before February 15, 2020, and had employees for whom they paid salaries and payroll taxes or paid independent contractors.

Lenders will also ask you for a good faith certification that:

  • The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
  • The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
  • The borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
  • From Feb. 15, 2020, to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan)
  • As of this writing, we are awaiting guidance from SBA to whether credit worthiness will be a factor. Historically, disaster loans required around a 640 credit score to be accepted.

If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents

(final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.

HOW MUCH CAN YOU BORROW UNDER THE CARES ACT?

Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.

Payroll Costs

  1. Employers: The sum of payments of any compensation with respect to employees that is a:
  • salary, wage, commission, or similar compensation;
  • payment of cash tip or equivalent;
  • payment for vacation, parental, family, medical, or sick leave
  • allowance for dismissal or separation
  • payment required for the provisions of group health care benefits, including insurance premiums
  • payment of any retirement benefit
  • payment of state or local tax assessed on the compensation of the employee
  1. For Sole Proprietors, Independent Contractors, and Self-Employed Individuals: The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.

WILL THIS LOAN BE FORGIVEN?

Borrowers are eligible to have their loans forgiven. Loan forgiveness cannot exceed the principal.

A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan:

  • Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
  • Interest on the mortgage obligation incurred in the ordinary course of business
  • Rent on a leasing agreement
  • Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
  • For borrowers with tipped employees, additional wages paid to those employees

Download the CARES ACT Guide

Cares Act Guide- Download

 

For forms and specific information from the Small Business Administration (SBA) click here

For Paycheck Protection Program Forms and assistance from BizFundfinder click here

Bizfundfinder.com and Foresight Business Funding provide SBA(7) and other SBA loans for businesses that need working capital, Business Real Estate or to refinance Business Real Estate. If you need business loans or funding under The CARES Act or SBA disaster relief program, we likely can not directly assist you.

If you have general questions, or would like to know your financing options, feel free to contact us or call (317) 589-0118.  Many of our lenders are funding, especially Preferred SBA Lenders are funding as usual for most industries.