Senate Bill Provision Offers Hope to Small Business

Senate Bill Provision Offers Loan Forgiveness to Small Business for Payroll Costs

In the face of the COVID-19 pandemic, the United States Senate is currently debating S. 3548, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act.” It is estimated that the CARES Act could provide a $1 to $2 Trillion stimulus in economic aid to both businesses and workers.

While multifaceted, one provision sets forth a significant benefit to small businesses that can apply for forgivable loans from the Small Business Administration (SBA). Here are the basics of what this section of the CARES Act provides:

  • Provides for bridge loans to small businesses under 500 employees
  • Uses the SBA’s current Section 7(a) loan program
  • Loans support payroll costs incurred between March 1st & June 30th, 2020 (referred to as the “Covered Period”)
  • Employers can borrow up to $33,333 (equivalent to annual compensation of $100,000 per year) of compensation paid to employees during the Covered Period
  • Borrowers under this program can have the loans forgiven if they maintain “payroll continuity” during the Covered Period (presumably not laying employees off)
  • Application processes are to be expedited by the SBA and certain fees are waived
  • Loans forgiven under the program are not considered taxable loan cancellation income
  • At this writing, the bill appropriates $350 billion for this program

The Senate bill is currently embroiled in intense partisan debate, although the SBA loan provision stands a real chance of passage. Watch the SamuelsLaw Blog for future updates.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.