Lexington, Ky.—Wednesday, April 1, 2020
On Friday, March 27, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law.
As with any new legislation, the interpretation of the CARES Act continues to evolve as the federal agencies charged with the administration of the new legislation review and determine how to implement the prescribed benefits. We encourage you to seek professional advice from your financial or accounting professionals for specific questions.
In response to inquiries, we have prepared the following on specific areas of the Act, such as unemployment and small business loans, assembled from information found on the authoritative websites. We hope this information will be useful, however recommend that you also do more research within your state as benefits may vary.
Who will be covered by the expanded program?
The Act includes more workers than are usually eligible for unemployment benefits, including self-employed people and part-time workers.
As unemployment benefits are administered at the state level, we suggest you contact your State Workforce Development Department or Unemployment Insurance Benefits Office for details on how to apply. We recommend a Google search of “<state name> + unemployment insurance” and then proceed from there. Don’t be surprised if the state system is experiencing an overload, or if the system has yet to adapt to the new eligibility for self-employed people. Submit your claim and be patient as the state systems adjust to the new legislated benefit.
How much will I receive?
It depends on your state, but unemployment benefits often replace roughly 40 to 45 percent of a worker’s weekly wages. Under the CARES Act, eligible workers are expected to receive an extra $600 per week on top of their state benefit.
For the self-employed, benefit amounts will be calculated based on previous income using a formula from the Disaster Unemployment Assistance program. Self-employed workers will also be eligible for the additional $600 weekly benefit provided by the federal government.
Part-time workers are eligible for benefits, with the benefit amount and how long benefits will last dependent on your state. They are also eligible for the additional $600 weekly benefit.
How long will the payments last?
The length of the benefit varies by state, with many states already providing 26 weeks of benefits.
The Act provides all eligible workers with an additional 13 weeks. So, participants in states with 26 weeks would be eligible for a total of 39 weeks. The total amount cannot exceed 39 weeks, but it may be shorter in certain states.
The extra $600 payment will last for up to four months, covering weeks of unemployment ending July 31.
How long would the broader program last?
Expanded coverage would be available to workers who were newly eligible for unemployment benefits starting on January 27, 2020 through December 31, 2020.
How does the $350 billion small-business loan program work?
The U.S. Small Business Administration (SBA), under the stimulus package, will oversee the Paycheck Protection Program, which will distribute $350 billion to small businesses that can be partially forgiven if the companies meet certain requirements. The loans will be available to companies with 500 or fewer employees.
SBA loans will be administered by banks and other lenders. Businesses can receive loans up to $10 million, based on how much the company paid its employees between February 15 or March 1 and June 30, 2019, or if the first year of business, January 1 and February 29, 2020.
Loan proceeds may only be used to support payroll (not including compensation above $100,000 in wages), such as employee salaries; paid sick or medical leave; group health insurance premiums; and mortgage, rent and utility payments. Borrowers are required to certify that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; that they will use the funds to retain workers and maintain payroll, mortgage interest or lease payments, and utility payments; and that they are not receiving duplicative funds for the same uses from another SBA program.
No collateral or personal guarantees are required, loan payments are deferred for at least six months (and not more than one year), there is no prepayment penalty, and all fees are waived.
Loans made under this program are eligible for loan forgiveness. The borrower must apply for forgiveness with its lender directly. The amount forgiven is based upon a formula, taking into consideration—for example—employee retention and amounts spent by the borrower on eligible payroll costs, mortgage interest payments, rent payments and utility payments during a specific period of time. Any amounts forgiven are not taxable to the borrower as gross income. Any loan amounts not forgiven at the end of one year must be paid by the borrower over a period of up to 10 years at a maximum interest rate of four percent.
What is the application process?
Loans under the Paycheck Protection Program will be made through lenders that have been approved by the SBA. Applicants work directly with those lenders. The SBA will guarantee these loans. The SBA has an online tool that helps small businesses connect with SBA-approved lenders. Additionally, the U.S. Treasury has the authority to approve additional lenders. Business owners can also check with their local SBA District Office for an updated list of approved lenders participating in the Paycheck Protection Program.
Per the SBA, lenders may begin processing loan applications as soon as April 3, 2020.
The U.S. Chamber of Commerce Coronavirus Loan Guide to Help Small Businesses
U.S. Small Business Administration (SBA) Disaster Loan Assistance Application
U.S. Senate Committee on Small Business & Entrepreneurship Paycheck Protection Program FAQs
You can check the status of your SBA Disaster loan by calling 800-659-2955 or 800-877-8339 or emailing email@example.com.