Correction: This story originally referred to the maximum allowable payroll repayment for employees, how the loan amount will be calculated, and details on mortgage payment coverage. The story has been updated.
President Trump enacted the third and final economic stimulus package this afternoon. The law provides clear guidelines on what small businesses are eligible for and what their loans will look like. Here are the details.
The total amount of money invested in the fund is $ 349 billion. The loans are guaranteed by the federal government (which means there is no interest on the loan) and not taxable. All loan repayments are deferred for one year.
Any business with fewer than 500 employees is eligible for the loan. All states and territories are eligible. Self-employed workers, independent contractors and sole proprietors are also eligible.
Priority will be given to businesses in rural and underserved markets, including ex-combatants and members of the military community, women, socially and economically disadvantaged people, and businesses under the age of two, the draft text says. law.
More than 1,000 lending organizations will participate in the program, according to a spokesperson for Senator Marco Rubio.
How does the loan work?
The loan is repayable, that is, it does not have to be repaid, during what is called a “covered period”. This period is eight weeks, chosen by the small business owner and the lender, between February 15, 2020 and June 30, 2020.
The total amount of this forgivable loan, which is more like a subsidy, corresponds to 2.5 times the monthly payroll of businesses. The maximum amount that can be awarded to a single business is $ 10 million.
All operating costs, including employee payroll (and other forms of compensation), employee health care, mortgage interest, rent, utilities, and debt payments are included. The quarterly salary cost of an employee cannot exceed $ 33,333 (ie the equivalent of an annual salary of $ 100,000).
If a small business were to lay off employees during the period covered, the loan forgiveness amount would also be reduced proportionately. For example, if a small business halves its workforce, the loan amount will be reduced by 50%. If employee salaries have been reduced by more than 25%, the loan will be reduced proportionately. But, if all employees are rehired and their full wages are restored by June 30, no loan cuts will take place.
If the crisis continues for longer than expected, the law can be changed and the deadline extended, according to a spokesperson for Senator Marco Rubio. The eight-week period was determined in discussions with executives from the business sector.
To speed up the loan process, personal guarantees have been removed. 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 as directed.
“Our best estimate is that in two weeks it will be operational,” said a spokesman for Senator Marco Rubio.
Additional resources have been gathered by the Small Business Investor Alliance and can be found here.
The US Senate Committee on Small Business & Entrepreneurship has put together a list of frequently asked questions that can be found here.
Forbes’ Small Business Relief Tracker, along with additional funds, grants, and resources for small business owners, can be found here.