On March 27, 2020, the United States Congress approved a massive stimulus package called the CARES Act that provides (1) forgivable loans to small businesses so they can pay their employees and avoid insolvencies and (2) increased unemployment benefits to laid-off or furloughed workers.
The CARES Act also expands the Emergency EIDL Grants and provides employee retention credits and payroll tax relief. We will provide more details on these and other provisions of the CARES Act in future e-Alerts.
This new program provides 8 weeks of cash-flow assistance to small employers, including sole proprietors and independent contractors. Employers who maintain their payroll can get the loan forgiven for the portion of the loan that is used for payroll, rent, and utilities. These new Paycheck Protection Program loans will be handled through US Small Business Administration (SBA) approved private banks and lenders. If you want to apply for a PPP loan, you should contact your local banker to ask if they are approved to handle PPP loans. The US SBA also has information about these loans here.
For a Fact Sheet on these new loans from the US Treasury, click here.
Small businesses and sole proprietors can apply starting this Friday, April 3rd. Self-employed and independent contractors can apply starting Friday, April 10th. Applications will be available from your local banker, but you can download a sample form here to start working on it.
Businesses can borrow 2.5 times what their average monthly payroll was during the period 2/15/29 to 2/15/20. To determine your monthly payroll amount, you can include salary, wages (including cash tips), employee group health care insurance premiums, retirement contributions, and medical/sick leave. Example: If your annual payroll cost (adding in all these items) for the period 2/15/19 – 2/15/20 was $500,000, your average monthly payroll cost is $41,667. You can borrow 2.5 times your average monthly payroll cost, for a total loan amount of $104,168.
Because the loans are intended to help businesses keep paying their employees, the expectation is that a business will use at least 75% of the loan proceeds on salary (including health insurance, retirement, and leave) and no more than 25% of the loan proceeds on the other approved items (rent, utilities, and interest on mortgages or other obligations). Any amount of the loan over 25% used for approved items other than salary will not be eligible for forgiveness. Example: If your business receives a $100,000 PPP loan, in order to have the entire loan forgiven, you will need to spend at least $75,000 on payroll costs during the 8 weeks after you get the loan. You can spend the remaining $25,000 on rent, utilities, and interest, and the entire amount of the loan will be forgiven. But if you spend $50,000 on payroll and $50,000 on rent and utilities, only $75,000 of your loan will be forgiven and the other $25,000 will be converted to a 2-year loan with a .5% interest rate.
And while your business can spend your loan on any expenses, it will only be forgiven later if you spend 75% of it on payroll and 25% of it on the other approved items during the 8-weeks after you receive the loan. All portions of the loan that is not forgiven will be converted into a 2-year loan with a .5% interest rate.
Paycheck Protection Program FAQ’s for Small Businesses
The Small Business Owner’s Guide to the CARES Act
The CARES Act increases unemployment benefits and expands who can qualify for unemployment.
Under the bill, some furloughed employees who are still employed by your business but who are unable to work due to the coronavirus will be able to receive unemployment benefits.
Also, workers who don’t normally qualify for unemployment – like independent contractors and the self-employed – are also eligible for benefits.
The maximum unemployment benefit in Louisiana is $247 a week, but the CARES Act adds $600 per week to this amount, for a maximum total benefit of $847 per week.
And the bill adds on an additional 13 weeks of unemployment benefits to Louisiana’s existing 26 weeks, so employees can stay on unemployment for a total of 39 weeks.
These changes go through the end of 2020, so they aren’t permanent.
To get these increased benefits, Louisiana’s Governor must sign an agreement with the federal government. As of the date of this e-alert, that had not happened yet, but it is anticipated that it will happen soon. And while we can’t be certain, we believe that anyone who has already filed for unemployment will begin receiving these increased benefits as soon as they are approved.
Laid-off employees can file for unemployment benefits here: https://www.louisianaworks.net/hire/vosnet/Default.aspx
For more information, please visit the Coronavirus Resources section of our website by clicking here.
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