The Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act” has been signed into law and provides $2 trillion in relief to American households and businesses from the economic destabilization caused by the COVID-19 pandemic.
Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. Small businesses and sole proprietors can begin applying on April 3. Independent contractors and self-employed individuals can apply beginning on April 10. Although the program is open until June 10th, it is best to apply as soon as possible given the loan cap of $350 billion. What Expenses Can Be Covered?
- For 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
- 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.
Do I Qualify?
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
For more information on whether you or your business will qualify to receive paycheck protection, you can review the U.S. Chamber of Commerce CoronaVirus Small Business Guide and Checklist. If you have questions about qualifying for the benefits offered under the CARES Act, contact us today.