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.

The administration soon will release more details including the list of lenders offering loans under the program. In the meantime, the U.S. Chamber of Commerce has issued this guide to help small businesses and self-employed individuals prepare to file for a loan.

Download the Guide and Checklist here.

1. Form 2483

2. 2019 YTD business financials (balance sheet & profit & loss)

3. 2018 or 2019 business tax returns for the applicant business or Schedule -C

4. 12 months’ worth of payroll costs for 2019 including: (If employed less than 12-months, then provide as much as you have.)

• For employers
  • 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 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 employees
• 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.

5. Applicable business entity registration documents such as:

• Articles of Organization
• Articles of Incorporation
• By-Laws
• Operating Agreements
• Tax Identification Number (EIN)

Tony Nitti | Forbes

A nation desperate for any reason for optimism got just that on Wednesday evening, with word that Congress had finally agreed upon a stimulus package designed to reverse the devastating impact of the COVID-19 pandemic. The Senate overwhelmingly passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the House is set to do the same on Friday, paving the way for the President to sign the bill into law.

In addition to providing a large cash infusion to hospitals and broader access to COVID-19 testing to individuals, the CARES Act aims to boost the economy with over $2 trillion in relief, ranging from individual rebates and small business loans to increased unemployment benefits and a wide variety of tax breaks.

In this space, we focus primarily on the tax aspects of legislation — and we’ll certainly do so here — but we’d be remiss if we didn’t first address, in more general terms, the most immediate forms of relief provided by the CARES Act: the individual stimulus payments and small business loan provisions.

Small Business Loans

In a move designed to keep small businesses afloat, the CARES Act provides that businesses with fewer than 500 employees — including sole proprietors and nonprofits— will have access to nearly $350 billion in loans under Section 7 of the Small Business Act during the “covered period,” which runs from February 15, 2020 through June 30, 2020. The loans, which are referred to as “paycheck protection loans” and are fully guaranteed by the federal government through December 31, 2020 (returning to an 85% guarantee for loans greater than $150,000 after that date), are generally limited to the LESSER OF:

• the sum of 1) average monthly “payroll costs” for the 1 year period ending on the date the loan was made (an alternative calculation is available for seasonal employers) multiplied by 2.5, and 2) any disaster loan (discussed below) taken out after January 31, 2020 that has been refinanced into a paycheck protection loan, and
• $10 million.

Payroll costs, in turn, are the sum of the following:

• wages, commissions, salary, or similar compensation to an employee or independent contractor,
• payment of a cash tip or equivalent,
• payment for vacation, parental, family, medical or sick leave,
• allowance for dismissal or separation,
• payment for group health care benefits, including premiums,
• payment of any retirement benefits, and
• payment of state or local tax assessed on the compensation of employees,

Payroll costs do not include, however:

• the compensation of any individual employee in excess of an annual salary of $100,000,
• payroll taxes,
• any compensation of an employee whose principal place of residence is outside the U.S., or
• any qualified sick leave or family medical leave for which a credit is allowed under the new Coronavirus Relief Act passed last week.

Example. Rob’s Car Wash applies for a paycheck protection loan on May 1, 2020. The business had $1.2 million in payroll costs for the period May 1, 2019 through May 1, 2020, for a monthly average of $100,000. Rob’s Car Wash is entitled to a fully guaranteed federal loan —assuming it’s made before December 31, 2020 — equal to the LESSER OF:

• $250,0000 ($100,000 in average payroll costs * 2.5), or
• $10 million.

The loans will have a maximum maturity of 10 years and an interest rate not to exceed 4%. Proceeds may be used to cover payroll, mortgage payments, rent, utilities, and any other debt service requirements. The standard fees imposed under Section 7 of the Small Business Act are waived, and no personal guarantee is required by the business owner.

An additional provision in the CARES Act provides for possible deferment of repayment of the loans for a period of at least six months, but not to exceed a year.

Read More.