Adopted by the House of Representatives on Friday, and signed by Donald Trump in the process, the gigantic aid plan (2.200 billion dollars) provides direct aid to individuals, but the largest share of the endowment will go to businesses, especially small and medium-sized businesses. An update on what you can expect from the CARES Act if you run a business, or are self-employed (and without reading the 880 pages of the law…).

1 / Up to $ 10 million loan to “protect jobs”

Most of the money “distributed” to SMEs by this law will be distributed through “SBA loans”. These Small Business Administration loans are available in ordinary times (they are known as loans 7 (A)), but there they are considerably extended and expanded under the name of “Paycheck Protection Program” (PPP). The amount of $ 350 billion is provided for in law to finance these loans. The SBA has promised to publish the precise implementation rules within two weeks, but in the meantime, here is what we know:

Which companies are eligible for these loans?

The eligibility criteria set by law are particularly flexible and in fact, the vast majority of companies with less than 500 employees could be entitled to it ”, notes Antoine Guillaud, founding president of the accounting firm International Management Solutions. To be able to apply for these loans, you must:

-Have less than 500 employees (this limit applies by physical location in the food and hotel sector, so as to include in particular restaurant and hotel chains). For some industries, the ceiling can be up to 1,500 employees (see here). The self-employed (self-employed, freelancers, sole proprietor) also have access to these loans.

-Being in operation since February 15

-Have since February 15 had employees or hired freelancers (“Independent contractors”).

Have been impacted by Covid-19 (the law simply requires a “good faith certificate” to meet this condition).

You must also be a company incorporated under American law, but it can be a subsidiary of a foreign group (in this case, the ceiling of 500 employees is however appreciated for the whole group).

How to get these loans?

Like the other SBA loans, these loans are granted by banks, and guaranteed by the administration. "Especially in these times of high demand and difficulty in accessing the SBA, it is therefore recommended to approach your bank directly", advises Antoine Guillaud. The "guidelines"However, will not be published by the administration for at least a week or two. Banks will not be able to issue loans before.

No personal or collateral guarantee can be requested by the bank.

How?

The loans cover in principle 2.5 months of the company's wages (average of the previous 12 months) and can go up to 10 million dollars, with an interest rate which cannot exceed 4%. They can be reimbursed over a maximum of 10 years. The bank should defer any payment (principal, interest or fees) for at least six months but not more than one year.

Will there be a refund?

This is the divine surprise of the system: most of these loans can be transformed into outright grant for the following amounts spent within 8 weeks of the loan being put in place:

-Salaries (and charges)

– Interest on real estate loans put in place before February 15, 2020

-Rent if the lease existed on February 15, 2020

– “Utilities” (water, gas, electricity, etc.) for contracts that came into force before February 15.

To be able to benefit from the full amount of this subsidy (in the form of debt forgiveness), one must not have been dismissed or reduced wages by more than 25%. If layoffs have occurred, the subsidy may still be available, but will be reduced accordingly. In addition, employers who have already made redundancies but rehired these same people will also have the right to waive their claims.

2 / “Disaster” loans and a grant of $ 10,000 for all SMEs

The “Economic Injury Disaster Loans” (EIDL), also managed by the SBA, have existed for a long time to cover companies victims of disasters, natural disasters or others. Since the beginning of March, all companies experiencing difficulties due to the Covid-19 crisis could have access to it. The CARES Act further expands its scope.

Companies eligible for EIDL: You must have less than 500 employees; have been in business since January 31, 2020 and have suffered losses directly attributable to the Covid-19 crisis.

How to request them: Unlike Pay Check Protection Program loans, these loans are made directly by the SBA. You must request it directly on the dedicated section of the site.

How: These loans can go up to $ 2 million; the interest rate is 3.75% (2.75% for no profits); Repayment (interest and principal) is deferred for 4 years

Condition: Below $ 200,000, loans can be obtained without personal guarantee. Furthermore, the SBA may grant them on the sole basis of the applicant's credit score.

Subsidy (“grant”): The law further provides that EIDL applicants can immediately obtain emergency assistance of $ 10,000 (within 3 days) which will not have to be repaid, even if the loan is refused.

The two loan categories (PPP and EIDL) are cumulative

3 / Other aid

Other aid is provided by the Care Act:

Payroll taxes: affected companies (and self-employed) can defer payment of social security charges (6.2% of gross salary) due for 2020 and pay them over the next two years. This possibility cannot be combined with the grants (write-off) provided by the Paychek Protection Program.

Tax credit: Companies that have either been closed due to a containment order or have lost more than 50% of revenue compared to the same quarter of last year, can benefit from a tax credit of 50% of the wages spent between March 13 and December 31, 2020, up to a limit of $ 10,000 per employee.

Reportable losses: the conditions for applying losses carried forward ("net operating loses”) Are more flexible – we can now carry over 100% of losses from previous years, against 80% previously.

Extension of the April 15 limit: it is not only the deadline for filing tax returns which is extended to July 15, but also the payment of taxes, which allows companies to preserve their cash reserves for 3 months. Other facilities are granted to improve cash flow (relaxation of the “carry back” rules, possibility of receiving certain “tax refunds ” in advance, etc.).

Among the many online resources, the records of the American Chamber of Commerce are particularly well done.

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