CARES Act: What You Need To Know
Your Chamber Breaks It Down: EIDL & PPP
We know information is coming from many sources regarding the CARES Act, including what actions you as business owners and essential employees need to take regarding economic recovery. We at the Greater Vancouver Chamber of Commerce are committed to sharing updated and accurate information daily to assure our community members are receiving the best resources available.
Enacted today April 1st is the CARES Act, a $2 Trillion stimulus fund, formally named the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Within this $2 Trillion, $350 Billion has been set aside to provide for the United States’ Small Businesses to stabilize business, provide for workers, and prepare for an economic downturn. From the CARES Act, accessible through the Small Business Administration (SBA), there are a couple different things you NEED to be aware of, first and foremost: the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP).
Economic Injury Disaster Loan (EIDL) Application – This is something to due immediately!
This title can be misleading for many, as this presents an opportunity for qualifying businesses and organizations to receive a $10,000 grant. When applying online, check the box for the $10,000 advance grant, confirm that the grant will be used to cover associated costs like payroll, lease/mortgage, etc., and your application will be submitted. Keep in mind, there is a limit to how much they are paying out, and since announced, there are a lot of organizations that qualify who have since applied. The online application takes 15 minutes max: COVID19Reliefsba.gov/#/
Paycheck Protection Program (PPP)
Organized through the Small Business Administration (SBA), the PPP loan will cover employees on your payroll that are full-time, part-time, or any other status. This program, which has been referred to as critical to economic recovery, allows businesses to receive a 100% federally guaranteed and potentially forgivable loan, for up to 2.5x your monthly average payroll. In overview this forgivable loan needs to be used in an eight-week period for approved expenses (I.e., payroll, lease/rent payments, health insurance costs, etc.). At the end of the eight weeks, you will then need to file for loan forgiveness with the bank.
Does Your Business Qualify? Who Can Apply?
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons). Businesses in certain industries can still apply even if they have more than 500 employees if they meet the SBA’s size standards for those industries. Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
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
- 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.
NOTE: All Other Types of Nonprofit Organizations with 500 or Fewer Employees
Despite calls by nonprofit and trade association leaders to include all types of nonprofit organizations as eligible loan recipients under the Paycheck Protection Program (PPP), the final version of that section of the CARES Act only includes entities organized under sections 501(c)(3) and 501(c)(19) of the Code. With that said, emergency financial relief for other types of nonprofits, such as 501(c)(4) social welfare organizations and 501(c)(6) trade and professional associations, is available under a separate section of the legislation addressing emergency Economic Injury Disaster Loan (EIDL) grants. In addition, nonprofit organizations of all types that do not receive SBA Paycheck Protection Program 7(a) loans are also eligible for Employee Retention Payroll Tax Credits under Section 2301 of the CARES Act.
Apply Through Your Bank or Other SBA Lender
To receive a PPP loan, you will apply through any existing SBA 7(a) lender, or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating - in other words, participating banks and credit unions that you feel comfortable working with. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program. Use this Sample SBA Loan application to view proposed questions.
How Much Can You Borrow?
These loans can total up to 2.5x your average monthly payroll costs (of course, not to exceed $10 million). For instance, if you are granted a loan, you will find your Payroll Costs by deducting the Sum of Excluded Payroll Costs (i.e., compensation of an individual employee in excess of an annual salary of $100,000 or employees whose residences are outside of the United States) from the Sum of Included Payroll Costs (i.e., salary, wage, commission, payment for vacation and sick leave, or payment of cash tip or equivalent). Special rules apply for seasonal employers, read more.
Applications will open for the PPP this Friday, April 3, when lenders may begin processing loan applications. To prepare for this process, the SBA has created an online sample form available here.
For a detailed overview of the Economic Injury Disaster Loan (EIDL): SBA Resources & Application
For detailed overviews of the Payroll Protection Plan (PPP): SBA Resources & US Chamber of Commerce: PPP Infographic
If you have any questions, please let us know - we're happy to help.