The CARES Act | Provided by CPA: Coalition for a Prosperous America
The benefits for small (<500 employees) are well-detailed as they are based on existing SBA rules and processes.
Secretary Mnuchin has said the small business loans and programs could start to become available this Friday (April 3), although a Washington Post article said most banks would need several more days to gather and process the paperwork before making loans available.
The $2.2 trillion total divides up this way:
- Small business benefits
- $349 billion Paycheck Protection Program
- Large business benefits
- About $500 billion total
- Includes programs of direct grants and loans to airline industry
- National security industry support of $17 billion, widely believed to be destined for Boeing
- Airlines to get $50 billion
- Cargo airlines to get $8 billion
- Remainder (about $400B) to be allocated chiefly by the Federal Reserve
- Direct payment to individuals and families
- Up to $2400 per couple
- Total cost: $301 billion
- Unemployment insurance
- Total cost $250 billion
- Health care industry
- About $100 billion direct to hospitals
- About $40 billion for PPE for health care workers, testing supplies, supporting CDC, increased workforce training, Medicare payments, and other health care investments.
- State, local and tribal governments
- $150 billion total
- Raising spending on USDA bailout program by $20 billion (to $50B)
Large business benefits
- Payroll tax credit
- Employee retention tax credit (ERTC) for 50% of employers’ share of payroll tax paid between March 12 and Dec. 31, 2020 up to $10,000 per employee for employees who are not working but still on payroll.
- Credit cannot exceed total of payroll tax
- Available to companies with more than 101 full-time employees.
- Deferred payroll tax
- Employer payroll tax due can be deferred to Dec 31, 2020 (half) and Dec 31, 2021 (other half)
- Federal Reserve programs: PMCCF
- The Fed created on March 23rd a “Special Purpose Vehicle” called the Primary Market Corporate Credit Facility(PMCCF) to make loans to investment grade large businesses.
- Loans are “bridge financing” in form of direct loans or bonds, for up to four years.
- Principal and interest payments can be deferred for first six months, “extendable at the Federal Reserve’s discretion, in order to have additional cash on hand that can be used to pay employees and suppliers.”
- US Department of Treasury will make an equity investment in the PMCCF fund (not the individual companies).
- BlackRock is main financial advisor to the government on this fund.
- Federal Reserve program: TALF
- The Term Asset-Backed Loan Facility (TALF) is a plan for the Fed to purchase bundled groups of assets secured by auto loans, credit card debt, student loan, and other assets. This is to help out banks and analogous to what happened in 2008-9.
- Federal Reserve program: Main Street Lending
- This program is to be targeted at small business. It is so far unclear how this program will work.
- Unemployment Assistance
- This program may be relevant to large businesses as the federal government has expanded unemployment coverage for employees laid off as a result of the coronavirus.
- This program also includes self-employed (i.e. “freelance” or “gig economy”) workers.
- Further, states may elect to implement “short-time compensation” schemes which will compensate employees put on reduced hours by their employers. The federal program would pay 100% of the costs businesses incur in using this program through Dec. 31, 2020.
Small business benefits
- Employee Retention Tax Credit (ERTC)
- As above, but for smaller companies (<100 employees) businesses are eligible when employees are still working provided business has suffered a 50% or greater reduction in gross receipts in the quarter.
- Paycheck Protection Plan (see full information here)
- To qualify, must meet SBA definition of small business which varies by industry and in some cases depends on annual revenue but in many cases depends on employee count with a limit of 500 or in some cases up to 1,500. Details of size criteria are here.
- Sole proprietors, independent contractors, self-employed persons, ESOPs, nonprofits (501c3, 501c19) can all qualify
- Loans will be guaranteed by SBA but made by an SBA-approved lender.
- Max value of loan is $10 million
- Loan forgiveness of up to 8 weeks of average payroll, mortgage interest, rent, utilities, and health care benefits will be forgiven by the SBA.
- Loan forgiveness will be reduced or lost if employer reduces employee count.
- Emergency Economic Injury Grant and Loan (EIDL)
- Cannot apply for EIDL at same time as applying for PPP.
- Existing EIDL can be converted into PPP, if approved.
- Economic Injury Disaster Grant of up to $10,000 can be paid to businesses within three days of applying for an EIDL (loan)
- Emergency Injury Disaster Loan (EIDL) of up to $2 million is available for businesses suffering losses that would not have happened if the disaster had not happened.
- Even if the EIDL is not approved, the grant will not need to be repaid.
- To apply, visit https://covid19relief.sba.gov/
- Small Business Debt Relief Program
- This is a program of SBA-guaranteed loans of up to $5 million for businesses that meet SBA criteria for small businesses.
- The SBA will cover all loan payments on these loans including principal, interest and fees for six months.
- To understand which of the various SBA programs would be the best fit for your business, and help to find the right lender, the SBA website provides guidance and tools.