CARES Act Summary

Contributor: Che Watkins

If you are a small business owner, nonprofit leader, or gig worker, you may feel overwhelmed by the search for available resources to serve you during and after the pandemic. With years of experience in executive leadership, client management, and relationship building, Che Watkins can offer a wealth of information to those grappling to make ends meet. Ms. Watkins is not only a dynamic leader, but also a colleague in the field.

As an influential collaborator and a supporter who has lobbied for the rights of many, including the industrious and the vulnerable, Ms. Watkins is here to help business owners dissect the newly enacted CARES Act. Highlighting Access and Opportunities, she enumerates a number of options available to those impacted by the pandemic.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides $2 trillion in stimulus in various forms.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 26, 2020. The package provides $2 trillion in stimulus in various forms. This article will discuss the programs under the CARES Act that are available for small businesses, nonprofits, independent contractors and gig workers. It will not cover programs for businesses with over 500 employees.

The guidance issued recently is confusing at times and changes regularly. Hopefully, this article will help to clarify as much as possible. However, it is highly encouraged that business owners consult their accountant or tax preparer prior to applying. At the end of this article, you will be asked to complete a short survey to assess where you need the most help with this program. Depending on the response, we will set up webinars to delve more deeply into the details, or to provide one-on-one time for specific questions.

The CARES act allocated $350 billion to help small businesses keep workers employed during the economic downturn. This program is the Paycheck Protection Program, or PPP. Here are the highlights:

Rate: 1.0% (Please note that the original guidance showed a rate of 0.5%. This rate was changed recently mainly for the benefit of smaller banks.)
Loan amount: 2.5 times the average monthly payroll
Terms: 2 years
First 6 months of payments are deferred
No collateral or personal guarantee is required
Loan forgiveness on funds is used for qualifying expense (payroll, benefits, rent, mortgage, utilities). Employers must maintain employment between March 1 and June 30. Depending on your bank, at the end of this eight-week period, you will be asked to show evidence of your qualifying expenses to your lender, and it will forgive the equivalent amount on your loan.
Any remaining amount must be repaid. The first six months are deferred; you will have two years to pay back at 1% interest. Given the attention garnered by the program, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
Applications must go through SBA-approved banks.
You must have been in business prior to February 15, 2020.

Here you will find a link to the application:
https://www.sba.gov/sites/default/files/2020-04/PPP%20Borrower%20Application%20Form.pdf

Business owners may need to consider all angles before applying for these funds. For owners asking how they can begin the process, this program is administered through SBA-approved banks. If you have a relationship with a bank, its representatives may be able to assist you. What type of relationship do you have with a bank? Most of the larger banks are only working with existing customers who have an existing credit relationship. There are complexities about why that is, but as a former banker, I do understand it. If you do not have a banking relationship that qualifies, look for credit unions, smaller community or regional banks in your area.

Second, businesses need to be thoughtful about what happens after June 30. Even if you obtain the loan, and it is forgiven, what is your next step? Will you have enough cash flow during this period to cover any other costs outside of this loan? These are questions that business owners should work through with their bookkeeper, accountant or finance person on staff. No one else can make those decisions but you.

There are three other helpful programs to consider.

Some businesses are also eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000 and a loan of up to $2 million. The advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid, but the loans will be assessed based on credit score.

The CARES Act has also substantially expanded access to unemployment insurance. If you have been furloughed, are a gig worker or a freelancer, you could be eligible for payments of $600 per week for four months on top of pay from state unemployment programs. If you think this may be the best route for you, please visit your state’s Department of Labor website.

In addition, forthcoming, direct payments of $1,200 or less and $500 per child ($3,400 for a family of four) are available to adults. The amount of the payments phases out based on earnings between $75,000 and $99,000 for individuals ($150,000 / $198,000 for couples). You must have filed your 2018 and/or 2019 income taxes for consideration.

The weight of what we are going through, how we financially support ourselves, how we help others—is a tremendous load to carry. If you think that the PPP is something that you need to consider, please complete this survey so that we have a better understanding of how to help you move through the process. The faster you provide the needed information, the better. Stay safe, and let us know if we can help.

Che Watkins is a former commercial banker and workforce development non-profit CEO. Feel free to connect with her via LinkedIn:
https://www.linkedin.com/in/che-watkins-5bb4614/

Additional Resources:
“What Government Agencies Can Do Now to Help Small Businesses Cope with the COVID-19 Crisis”
https://fusecorps.org/2020/03/26/what-government-agencies-can-do-now-to-help-small-businesses-cope-with-the-covid-19-crisis/