March 27th Update: $2 Trillion Stimulus Plan is Signed

March 27, 2020

On Friday, March 27, 2020, The House of Representatives passed a $2 Trillion Stimulus plan and the President has signed this legislation into law. What does this stimulus mean for you? Keep reading to learn more!

Stimulus Signed Into Law, Small Business Loan Program Details

The House of Representatives passed the $2 Trillion Stimulus plan today and the President has signed this legislation into law. As mentioned in yesterday’s email, one of the provisions that were included is $349 Billion to aid small businesses. This program allows small businesses (500 or less employees, including sole proprietors and independent contractors) to access assistance from the Small Business Administration in the form of a forgivable loan. For any CVTA member, who may be struggling or worried about how to meet your financial obligations to your staff, we strongly recommend you explore this program. This program is designed to enable businesses to survive during this time of crisis.

Who can borrow?

  • Small businesses (500 or less employees, including sole proprietors and independent contractors)

What are the Borrower’s requirements for a loan?

There is a waiver of Credit Elsewhere, Personal Guarantee or Collateral. Borrowers need not sign a personal guarantee, pledge collateral, or show that s/he can’t find credit elsewhere.

To borrow, a Borrower must: 

  • Make a good faith certification that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient;
  • Acknowledge that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;
  • That the eligible recipient does not have an application pending for a loan under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan; and
  • During the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received amounts under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan.

Loan Uses, Criteria, and Conditions 

The loan may be used to pay for the following during the period of February 15, 2020 through June 30, 2020:

  • payroll costs,
  • costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
  • employee salaries, commissions, or similar compensations;
  • payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation);
  • rent (including rent under a lease agreement);
  • utilities; and
  • interest on any other debt obligations that were incurred before the covered period.

What are “Payroll Costs”

They are defined as the sum of payments of any compensation with respect to employees that is a—

  • 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; or
  • payment of State or local tax assessed on the compensation of employees; and
  • the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period.

What is not included in “Payroll Costs”  

  • the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;
  • taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of
  • 1986 during the covered period;
  • Any compensation of an   employee whose principal place of residence is outside of
  • the United States;
  • qualified sick leave wages for which a credit is allowed under section 7001 of the
  • Families   First   Coronavirus Response Act; or
  • qualified family leave wages for which a  credit is allowed under section 7003 of the Families   First   Coronavirus Response Act.

Determining Loan Amount

During the covered period (Feb. 15-June 30, 2020), with respect to a covered loan, the maximum loan amount shall be the lesser of 10,000,000 or the sum of the product obtained by multiplying—

  • the average total monthly payments by the applicant for payroll costs incurred during the 1-year period before the date on which the loan is made, except that, in the case of an applicant that is seasonal employer, as determined by the Administrator, the average total monthly payments for payroll shall be for the 12-week period beginning February 15, 2019,  or at the election of the eligible recipient, March 1, 2019, and ending June 30, 2019; by 2.5; and
  • the outstanding amount of a loan under subsection (b)(2) that was made during the period beginning on January 31, 2020, and ending on the date on which covered loans are made available to be refinanced under the covered loan.

If not in business in 2019, then the above formula is the product obtained by multiplying—

  • the average total monthly payments by the applicant for payroll costs incurred during the period beginning on January 1, 2020, and ending on February 29, 2020; by 2.5; and
  • the outstanding amount of a loan under subsection (b)(2) that was made during the period beginning on January 31, 2020, and ending on the date on which covered loans are made available to be refinanced under the covered loan.

Loan Forgiveness

The Loan will convert the amounts used for payroll expenses, mortgage/rent, and utilities into forgivable loans (grants). The proportion of the loan considered for forgiveness depends on what portion of your employees (full-time equivalents) retained during the period of Feb. 15-June 30, 2020. CVTA will issue more about how this is exactly calculated incoming updates.

Additionally, CVTA will be sending out more information and holding webinars to brief members as soon as information is known.