First, the Good News
The first legislative response to the Coronavirus was signed by President Trump on March 6th. It included $1 billion in SBA loan subsidies.
Signed on March 18th, the second act included refundable tax credits to help businesses pay for expanded sick and family leave.
Now, the Great News
Congress is getting serious. Think $2 trillion serious. The CARES act has not yet been passed or signed as of March 25, 2020, but both the House and Senate drafts include a very large, new, SBA loan program – $350 billion large.
This program will enable employers with up to 500 employees to borrow four months payroll, debt service, rents, and utilities. Even better, the loan payments can be deferred for one year and (we saved the best for last) the payroll portion of the loan may be forgiven without tax consequences.
While we haven’t seen the fine print, we know a few things: The loan forgiveness amount will be reduced if you have a reduction in headcount or rates of pay. Debt service is only on debts incurred before March 1, 2020. Also, it’s unclear what the interest rate will be and if the interest during the deferral period will be forgiven. And, finally, you only get one Coronavirus related SBA loan: either an “EIDL” from the March 6th act, or a “7(a)” loan under the CARES act.
So, what’s next? What should you do now?
First, stay tuned. We will notify you as soon as we have obtained and analyzed the text of the final bill.
In the meantime, if you’re currently working on an SBA loan, you should probably put on the brakes for now.
Please contact us with any questions you may have. We’re here to help.