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.