UPDATE: From what I am hearing, the SBA is currently working on regulations setting forth the details of the forgiveable loan program and other parts of the small business-centric portions of the statute – I have heard rumors that they will be released by Monday, but this is a rapidly changing situation, so please check back regularly, is vague and lacking detail in many key respects. But, the regulations should provide more clarity when released (which, again, rumors are that this will be done by Monday; but could be earlier or later, so stay tuned!) UPDATE: the SBA has released the preliminary (Sample!!) application form for the Paycheck Protection Program. I am not aware of any banks taking applications yet, but you can review the application showing what information will be required.

SIDE NOTE: these stimulus measures are distinct from the SBA disaster declaration loan program which has been open for several weeks

Earlier this week, the Senate passed a record $2 TRILLION STIMULUS BILL dubbed the CARES Act (it stands for “Coronavirus Aid, Relief, and Economic Security [CARES] Act”) to respond to the COVID-19 crisis caused by the novel coronavirus. Today, the House passed it. President Trump is expected to sign the bill into law immediately [UPDATE: it has been signed] (also, read my previous article on COVID-19 and Force Majeure clauses. Some have blasted certain parts of this bill as being inadequate, but on the other hand $2 Trillion is a lot of money. I won’t get into the “shoulds” and “shouldn’ts” of politics here.

SIDE NOTE: our devotion to legislative acronyms apparently has not waned in this crisis

Additionally, please excuse the very flimsy analysis attached to this, as my main goal is to get the information out to you as soon as possible. In other words – WHAT is in this bill. Expect another post soon, outlining HOW you can apply for your piece of this to protect yourself, your business, your family, your loved ones, your employees, and our society and economy in this difficult time. The main parts of the bill are as follows: $560 Billion for individuals $500 Billion for big businesses $377 Billion for small businesses $339 Billion for state & local governments $153 Billion for public health … and more So, here’s how those payments get broken down into a little bit more detail. Again, apologies for the flimsy analysis here, as this is meant to be informational. $560 Billion for individuals – two main categories here, (1) direct checks to individuals and (2) expanded unemployment benefits Direct checks to individuals:
  • Most citizens will receive $1,200 each, for those making up to $75,000.
  • For those who make between $75,000 and $99,000, the payments are scaled back.
  • Those who make above $99,000 will not receive a check.
  • Payment/income amounts are doubled for married couples that file jointly, increased for head of household, there are child credits, etc.
  • You are not eligible if someone claims you as a dependant (even if you are an adult)
  • Have been told that it will be automatic. You don’t need to file a form. (!!)
  • Steve Mnuchin has stated that the expected timeline for payments is “within three weeks” (obviously, this is anecdotal and not necessarily binding guidance)
Expanded Unemployment Benefits (included in individual aid):
  • Eligible workers will receive an additional $600 per week on top of existing state unemployment benefits
  • This does not scale depending upon your state (some states are more generous than others for existing state benefits – eligible unemployed workers will receive $600 of federal benefits whether their state benefits are $150 or $1,000)
  • Self-employed people are eligible for unemployment benefits (gig workers, freelancers, independent contractors) (!!!!!)
$377 Billion in relief to small businesses, including:
  • In this context, small business means 500 or fewer employees [subject to some small exceptions]
  • The main components of the small business-focused portion of the bill are: (1) an emergency grant program and (2) a forgiveable loan program
  • $10 billion is allocated for emergency grants of up to $10,000 per business, for small businesses to cover immediate operating costs
  • $350 billion is allocated for the SBA to make loans of up to $10 million per business. If that loan is used for certain purposes (rent, payroll, etc.) then there are some debt forgiveness options – provided that workers remain employed through the end of June
  • NOTE: the mortgage, rent, and utilities must have been incurred prior to February 15
  • The maximum loan amount is $10 million while the interest rate on the loans can’t surpass 4%.
  • $17 billion allocated for payments on existing SBA loans
HERE is the website for the SBA’s COVID-19 response. This includes the applications for disaster declaration loans, which have been available for a few weeks. UPDATE: The forgiveable “paycheck protection” loan program (the largest part of the small business segment of the stimulus) has the following details, so far:
  • loans [which are 7(a) SBA loans] will be sized based on 2.5 months of payroll (up to a maximum of $10 million or 4x various costs, including rent, payroll, mortgage, etc.) [NOTE: in the Senate version of the bill, the loans were sized based on 4 months of various expenses, this was reduced in the House version that went final]
      • Calculated based on:
      • For established businesses, average monthly payroll for previous year
      • For new businesses, average monthly payroll for January + February 2020
      • For seasonal businesses, February-June of 2019
  • Loans will be forgiveable at the end of the year provided that layoffs are avoided, the funds are used correctly. NOTE: the forgiveness is NOT “all or nothing” – if you partially comply with the requirements, you can still receive partial forgiveness.
  • Any “misused” expenses (i.e. other than rent, payroll, utilities, mortgage) will reduce the forgiveable amount
  • Layoffs will reduce the forgiveable amount proportionally
  • pay reductions of employees who make less than $100,000 (by 25% or more) will count against the forgiveable amount
  • No personal guarantee, collateral, etc. will be required. However, certain eligibility criteria still apply.
  • Banks will make the loans, which will be guaranteed by the SBA, and the underwriting standards will be significantly loosened; so, it is recommended to stay in touch with your banker over the coming days
  • UPDATE: as of Monday afternoon, it appears that applications for this loan program are not open yet. Stay tuned.
  • again, please keep in mind that the regulations setting forth more details are expected to be released in the coming days
$500 Billion for big businesses including:
  • Focused on saving big businesses such as the airlines, and preventing mass layoffs, divided into two main categories:
      • (1) specific categories of business (airlines & national security)
      • (2) programs or facilities established by the Federal Reserve designed to support lending to businesses, states, and municipalities
Industry-Specific Categories
  • $25 billion in loans & loan guarantees for passenger air carriers (and related businesses)
  • $4 billion in loans & loan guarantees for cargo airlines
  • $17 billion in loans & loan guarantees for businesses critical to national security
Federal Reserve Category
  • The remaining $454 billion (!!!)
  • Standards for awards are thus far vague and have been criticized
  • Ban on stock buybacks, dividend payments, capital gain distributions, etc. (any company taking this assistance is prohibited from these for 12 months after the loan has been repaid)
  • Ban on assistance to Trump-affiliated entities
  • Compliance with employee-compensation directives of CARES Act
  • Various other restrictions
  $153 Billion for public health initiatives, including:
  • Hospitals responding to the coronavirus get $100 billion
  • $20 billion for veterans
  • Community health centers, the CDC, and telehealth providers all received help, too
  Other:
  • $339 billion for State & Local Governments
  • All payments on federal student loans are deferred through September 30
  • $15.5 billion toward food stamps
  • $8.8 billion for schools to help them provide for student meals
  • these are just SOME of the highlights; there is a long list of other specific programs receiving funding.
There have been a lot of other actions taken in response to this crisis, including the Defense Production Act being used to force car manufacturers to start building ventilators, and much more. Stay tuned for future blog posts on the impact of this crisis!