Coronavirus Aid, Relief, and Economic Security (CARES) Act
Relief, and Economic Security (CARES) Act Stimulus Package Explained w/ Neil Bradley, Exec Vice President and Chief Policy Officer, US Chamber of Commerce. NOTES FROM Friday, March 27th: 9-10am, by POW Chamber Directors Misty Fitzpatrick & Karen Petersen.
Introductions – there are 300 people on line! They are maxed out on the Zoom line!
Neil gave an overview of how the United States is dealing with this huge shock to the economy. It is greater than anyone could have foreseen. Right now there are businesses that have no revenue coming in the door.
Neil is going to review the Phase 3 of the stimulus package.
There are 3 key areas of this bill.
We should also be aware that the rebates that are going to be give to families is going to be $1200 per person, (2400 for a couple) plus 500 per child. They will be done via direct deposit. Eligibility will “phase out” at $75,000 of individual income and $150,000 per couple. Goal is to get checks deposited within two weeks.
Unemployment benefits extended by four months and week waiting period waived. Participating states will be provided funding to give an additional $600 per week, on top of their regular unemployment insurance benefits.
Three key areas:
1. Improving liquidity. This will give employers’ access to money. Allows employers to delay remitting their portion of payroll taxes for up to one year for 50% and up to two years for the remaining 50%. Provisions for enhanced deductibility with regard to investments. 1099 contractor expenses would not qualify but those contractors may apply for the program on their own.
2. Loan //Grant program – (This is a separate program from the SBA Economic Injury Loan Program addressed in yesterday’s teleconference)
*Expands SBA requirements. Will be equal to 2.5 times the regular payroll costs.
*There is an OPPORTUNITY in June to have the loan forgiven. In June they will review your payments (loan, payroll, utilities etc) This will be based on how many EMPLOYEES you were able to keep on the payroll. If you keep all employees then you get 100% forgiven. If you layoff half of your employees you will get 50% forgiven.
Includes provisions to accommodate seasonal employers.
Loans will be made through independent lenders. A list of lenders should be available the week of 4/1/20. Will not be eligible for this loan if you've taken out another loan to cover the same expenses. May roll another loan into this loan, if you've already applied for another one.
1. There is a portion of this bill that will allow BANKS to make loans easier than is now possible. This is intended for large corporations’ – ie airlines IN the coming days they expect the Government to expand lender’s ability to make loans
This includes 150 billion dollars for States, as well as dollars for Hospitals and the Health Care industry. The US Chamber is trying to facilitate this program, as well as looking down the road toward the next financial package.
· The Bill expands unemployment to individuals how otherwise would not qualify
· Sole proprietors also have a special program to help them too
· The payroll cost deferral includes: Salary, sick leave, heath care etc. Do not get to borrow against the FEDERAL portion
· This is modeled after the SBA program – BUT you will need to go through a traditional lender.
· This loans looks different from other loans. NO requirement to prove you have been turned down. There is no collateral. This is different from other loans – and is guaranteed by the Feds.
· What about tourism business who have not yet started up (ie have not hired yet)
· What if you have already laid off employees? You will probably need to bring those employees back to get the full benefit of loan.
· What about seasonal employees? IN the calculations which looks as average payroll costs. BUT there are provisions for SEASONAL or TOURISM businesses you can use a seasonal portion of your past payroll
· Non-Profits are not eligible (like 401 c 6 businesses) – should call to check because some are eligible
· How does a business deal with MANDATED closures? Should they just keep employees on the payroll? Yes
· The idea is that this loan will help you bridge your employees for 2-3 months
· Question about how this will support the fishing industry? DO NOT KNOW YET
· Question regarding to the SEASONAL employees – how does loan forgiveness work? This loan is intended to support the business for the period from now to end of June – so if there are employees normally hired in that period then the loan covers that. FORGIVENESS is based on the % of employees you have on the payroll during this time.
· Interest Rate is not more than 4% · Payments should arrive within the next 2 weeks depending on how fast people apply
· If your employees are CONTRACT employees and paid via 10-99 how does this work? The contract would have to apply for their own loan.
· Repayment guidelines – loan is deferred for 6-9 months (not certain) and the terms will be 10 years
· The MAXIMUM loan is 2.5 months of payroll expenses multiplied by 2.5%
· This loan MAY be able to be rolled into another loan
· The OBJECTIVE of this loans is to provide assistance to small business remain liquid AND to help them KEEP EMPLOYEES on the payroll – even if there is nothing for them to do.
· What if your business is still partially operational and still making money? One of the requirements of this loan is a Good Faith Certification that the business NEEDS the money
· If you have US Loans outstanding will this impact your ability to get this assistance? You may need to check on this – depends on the amount of money
· This program does NOT differentiate between the wages payed to an owner vs paid to an employee – but will not cover wages over $100,000 annually.
· IF A PERSON REFUSES to come back to work they SHOULD not be eligible for UNEMPLOYMENT
· How would an LLC get reimbursed for Sick Leave? This would reimburse a business that is paying an employee that is home sick during this time – OR taking care of a child who can not go to Day care or school during this time (Not sure if all businesses can get this – but I think so)
· Some businesses will not get impacted for several months due to billing cycles – this loan will be on-going and there is the Good Faith Certification that covers this.
· If an employee is using ACCRUED LEAVE will this be reimbursable? DEPENDS…
· Are commuter airlines eligible? Not certain
· Will LLC owner/operators be eligible for unemployment? Depends on the State.
This Bill is the equivalent of the entire payroll of the entire nation for a 6 week period (that is how they came up with the number. If this is still an issue in 6 weeks then congress will revisit this program.
Applying for the SBA loan will NOT prohibit you from getting this loan – however – you CAN NOT borrow for the same expense. There is an ability to ROLL a prior loan into this loan.
More information about the CARES Act here:
These loans will come THROUGH a traditional lenders – so that is where you need to go for an application.