Our nation’s small businesses are facing an unprecedented economic disruption due to the COVID-19 pandemic. In addition to traditional SBA funding programs, President Trump signed into law the CARES Act, which contains over $2 trillion in economic relief for American workers and small businesses. The CARES Act established the following temporary programs to address COVID-19.

The Paycheck Protection Program (PPP Loan)
This PPP loan program provides loan forgiveness if the funds are used for payroll costs, interest on mortgages, rent, and utilities. The loans are calculated based on 2.5 times your business’s monthly payroll costs and must be applied for through a financial institution. To qualify, you need to have a business that was in operation on or before February 15, and you must be an independent contractor, sole proprietor, or business with 500 or fewer employees. You must certify that your business has sustained economic damage due to COVID-19. Up to 100% of the PPP loan principal can be forgiven if the funds are used appropriately. No more than 40% of the forgiven amount can be used for non-payroll costs (mortgage interest, etc.). The funds must be used during a 24-week period from the date the loan was received. Loans issued prior to June 5 have a maturity of two years while loans issued after June 5 have a maturity of five years, and all loans have an interest rate of 1%. Borrowers can seek the help of a CPA or payroll processor for the payroll calculation used to derive the loan amount.

The Economic Injury Disaster Loan (EIDL) and Advance
The SBA is offering low interest federal disaster loans to small business and non-profit entities that are suffering economic injury because of COVID-19. These loans may be used to pay debts, payroll, accounts payable, and other bills that are not already covered by a PPP loan. To keep the payments affordable for small businesses, loans offer long repayment terms, up to a maximum of 30 years at an interest rate of 3.75%. Small businesses may also request an advance of up to $10,000 as part of their application. The current maximum loan amount is $150,000. An attorney can advise on restrictions on the use of funds and the UCC filing that the SBA places on the borrowing entity.

Walter Daszkowski, CPA, PFS
Daszkowski, Tompkins, Weg & Carbonella CPA, P.C.
1303 Clove Road, Staten Island
T: 718.981.9600 Option 1 / F: 718.981.9601
278 Route 34, Suite 1 & 2, Matawan,