Prior coronavirus legislation compelled the attention of employers in large part because of the need to understand and comply with new paid leave and unemployment benefits provided to American workers. The latest legislation is worthy of attention due to the significant impact it can have on an organization’s financial health and on the staffing decisions that must be made during these difficult times.
Modest in comparison to its predecessors, this new legislation injects $382 billion into two CARES Act small business loan programs whose funds were quickly depleted by a heavy volume of applications since early April. Most of the money – $310 billion – goes toward replenishing the PPP, which offers emergency loans to for-profit and non-profit organizations with fewer than 500 employees. These loans can be used for a multitude of purposes, but if used for payroll and benefits costs, as well as rent, mortgage, and utilities, they are potentially fully forgivable. The exact amount of forgiveness decreases as an organization reduces full-time employee headcount and/or lowers employee wages.
The new legislation also gives a much-needed infusion of funding to the Economic Injury Disaster Loan Program, which offers loans up to $10,000 to small businesses in underserved areas or in particularly distressed industries.
The new law allocates an additional $100 billion to hospitals to provide financial support during the crisis, including $25 billion to expand our country’s capacity to test for COVID-19.
We encourage you to reach out to your banking professionals and other financial advisors for more information about your potential eligibility under either of these programs. If you have questions about forgivability of PPP funds, please contact your legal counsel or accounting professionals.
A fifth coronavirus relief package is expected in early May when Congress is scheduled to reconvene. Around the same time, many states are slated to begin “Phase One” of reopening the business community, which will inevitably pose new legal challenges, and create new opportunities, as well. Needless to say, there are many new developments yet to come and we will continue to do our part to keep you informed. Your workforce is our priority.
The K|W|W Team