Insights 3/31/2020

We know you have many questions regarding the recently passed CARES Act (“the Act”), specifically, what are the next steps? In an effort to keep information flowing, we will produce a series of updates over the next few days as the administrative rules are published. As usual, please seek advice from your CPA, financial advisor, and/or banker on how to make the best decision for your business. Based on the date the Act was signed (3/27/20), there is a provision that states the administrative rules would follow within 15 days. With that said, the Paycheck Protection program Loan Application form has been released by the Treasury Department and the link is included below. Here are a few key updates:

  • Attached to this message is a “quick” summary of the specific employer resources stemming from the Act. There are three specific assistance programs involved: 1) the Paycheck Protection Program (PPP) loans through the SBA, 2) the Employee Retention Tax Credit, and 3) the Deferral of Payment of Employer’s Social Security Taxes. You can see the highlights of these three options on the attachment. Keep in mind that if you take a loan through the SBA PPP that is forgiven (i.e., used for payroll and other approved costs), then the other two options are unavailable. In other words, there’s no doubling up on these benefits.
  • We’re also attaching a document from the US Chamber of Commerce that includes a checklist and SBA guide related to the Act. This was sent in a prior email but we’re attaching again in case you missed it.
  • Unemployment benefits have been enhanced for employees that qualify, both in the amount and length of benefits available.
  • Banks and credit unions will be responsible for taking applications and processing the SBA PPP loans directly with businesses that choose to apply. Your lending partner will also be able to provide more information on forgiveness of the loan based on the Act, although basic information is contained in the “summary-of-payroll….” attachment. Loans are backed by the federal government and there are no application fees or closing costs. This is intentionally meant to streamline the loans. The Treasury Department released the loan application today, the link is here:
  • If you have taken an Emergency Injury Disaster Loan (EIDL), which have been around for years, these are different than PPP loans under the CARES Act. If you have already applied for or received an EIDL loan, you will be able to refinance the EIDL into the PPP for purposes of loan forgiveness. However, you may not take out an EIDL and a PPP at the same time and for the same purposes.
  • RMI is preparing a report for client access that provides payroll information based on the “12-month look back period” in the PPP part of the Act. This is one piece of information required to determine the loan amount for which a qualifying business may be entitled. We anticipate this report being ready in the next day or two.

If you are anticipating taking a loan through the SBA PPP, and you want that loan forgiven, it may be in your best interest to retain employees and also avoid large wage reductions. This is a decision each client must make based on their own circumstances and needs to keep the business sustainable. On the attachment “summary-of-payroll…”, page 3, please review the bullet on “Reductions in Loan Forgiveness” in the second column when considering this topic.