As a reminder, the FFCRA goes into effect today.  The Families First Coronavirus Response Act creates new emergency paid sick leave and emergency paid family and medical leave requirements for employers.  We have covered the FFCRA extensively in prior emails, but please see this employers’ guide and FAQ from the Department of Labor as a refresher.

In addition to the FFCRA, the President signed the CARES Act into law on March 27.  The Coronavirus Aid, Relief and Economic Security Act seeks to provide economic relief in a number of ways, including with two new or modified loans for small businesses:

Paycheck Protection Program (PPP)

PPP provides loans of up to $10 million to small businesses to help keep their workforce employed, and the loans can be forgiven in their entirety if certain conditions are met.  Small businesses will soon be able apply to lenders through the existing SBA 7(a) program.

• Loan of 2.5x average monthly payroll over prior 12 months, maximum $10 million
• No collateral or personal guarantee required
• Interest rate no higher than 4%
• Repayment, if required, can be made over up to 10 years
• Forgiven equal to the amount spent on:
• Payroll
• Interest on mortgage
• Rent
• Utilities
• Forgiveness reduced if:

• Number of employees reduced, or
• Amount of total wages paid reduced by 25% or more

• Eligibility:

• Small business with fewer than 500 employees
• Small business that otherwise meets the SBA’s size standard
• 501(c)(3) with fewer than 500 employees
• Sole proprietor
• Independent contractor
• Self-employed

• Good faith certification required:

• Uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
• Borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
• Borrower does not already have an application pending for a different loan duplicative of the purpose and amounts
• From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (there is an opportunity to refinance emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan under PPP terms)

• “Payroll costs” defined:

• Includes salary, wage, commission, or similar compensation, payment of cash tip or equivalent, payment for vacation, parental, family, medical, or sick leave, allowance for dismissal or separation, payment required for the provisions of group health care benefits, including insurance premiums, payment of any retirement benefit, and payment of State or local tax assessed on the compensation of employees.
• Excludes compensation for an individual employee in excess of $100,000 annual salary and amounts for which you are getting credit under FFCRA.

• More guidance from SBA to come

For more information, see this helpful guide from the U.S. Chamber of Commerce.

Economic Injury Disaster Loans (EIDLs)

EIDLs predate the CARES Act, but the new law expands eligibility and relaxes requirements so that more businesses may qualify.

• Can be approved by the SBA based solely on an applicant’s credit score
• EIDLs that are smaller than $200,000 can be approved without a personal guarantee
• Borrowers can receive a $10,000 emergency grant cash advance that can be forgiven if spent on:
• Paid leave
• Maintaining payroll
• Increased costs due to supply chain disruption, mortgage or lease payments or
• Repaying obligations that cannot be met due to revenue losses.

• A business may apply for both a PPP loan and an EIDL, but the borrowed amounts cannot be used to pay for the same expenses.

These loans are available from the SBA now, and you can apply online here.