President Trump signed the third and final economic stimulus package into
law this afternoon. The law provides clear guidelines on what small
businesses are eligible, and what their loans will look like. Here are
the details.
The total amount of money going in the fund is $349 billion. The loans
are federally-guaranteed (meaning there is no interest on the loan), and
tax-free. All loan payments are deferred for one year.
Any business with less than 500 employees is eligible for the loan.
All states and territories are eligible. Self-employed individuals, independent
contractors, and sole proprietors are also eligible.
Priority will be given to businesses in
under-served and rural markets, including veterans and members of the military
community, women, socially and economically disadvantaged individuals, and
businesses that are less than two years old, reads the text of the bill.
How Does the Loan Work?
The loan is forgivable, meaning it doesn’t have to be paid back, during what is called a “covered period.” This period is eight weeks, chosen by the small business owner and the lending agency, between February 15, 2020 and June 30, 2020.
The total amount of this forgivable loan, which is more akin to a grant, is 2.5 times the businesses’ monthly payroll. The maximum amount that can be given to a single business is $10 million.
All operating costs, including employee payroll (and other forms of
compensation), employee health care, interest on mortgage, rent, utilities, and
debt payments are included. The quarterly payroll cost for an employee
cannot be more than $33,333 (i.e., the equivalent of an annual salary of
$100,000).
If a small business had to lay off employees during the covered period, the
forgivable amount of the loan will also be reduced proportionally. For
example, if a small business cut back half of their workforce, the amount of
the loan will be reduced by 50%. If employee salaries were reduced by more than
25%, the loan will be reduced proportionally. But, if all employees are
rehired and their full salaries restored by June 30, no reduction of loan will
occur.
If the crisis continues longer than expected, the law can be amended and the
time period extended, according to a spokesperson for Senator Marco
Rubio. The eight-week period was determined in discussions with business
industry leaders.
To expedite the loan process, personal guarantees have been waived. All that is required is a “good faith certification” that your business has been affected by the COVID-19 pandemic, and that the funds will be used according to the guidelines.
