The last 30 days have been a nightmare for Connecticut employers – and most are feeling the financial strain caused by the crisis.
As many are aware, the federal government recently passed legislation to provide financial assistance to employers – including small businesses. Now while the initial funding of $366 billion has already run out, it is expected another $250 billion will soon be added.
The Coronavirus Aid, Relief, and Economic Security Act (CARES), signed into law at the end of March, provides several options for relief for businesses with 500 or fewer employees. The U.S. Small Business Administration is managing the disbursement of these funds, including the initial $366 billion earmarked for $10,000 emergency grants (Economic Injury Disaster Loans – EIDLIf paying ) and what is called the National Payroll Protection Program (PPP).
Here are a few tips on gaining access to these funds once additional dollars are added:
- First – remember, it’s not an either/or proposition. Many businesses may qualify for both programs.
- The PPP is a two-year, 1% interest, forgivable loan, deferred for six months. The loans can be for up to $10 million, but the exact amount is calculated by multiplying a business’s average monthly payroll by 2.5. The potential for this loan to be completely forgiven by the feds makes it quite attractive for small businesses. To qualify for full loan forgiveness, employers must keep 100% of their employees on the payroll for eight weeks during this pandemic. Seventy-five percent of the loan must be used for payroll relief to qualify for loan forgiveness. The balance of the funds can be used to defray the costs of rent, mortgage interest, or utilities.
- If paying payroll is not so much of a concern, then the Economic Injury Disaster Loans (EIDL) are the way to go. The Small Business Administration is advertising the loans as $10,000 of immediate financial aid that does not need to be repaid. The amount available is less than $10,000 for companies with fewer than ten employees, dropping by $1,000 per employee less than ten. The funds can be used by employers for any purpose.
- The CARES Act also calls for additional funds to be issued in the form of up to $2 million in loans, to be repaid over a maximum of 30 years at interest rates of 3.75% for small businesses, and 2.75% for not-for-profits.
- The deadline for the PPP program is June 30th. No Connecticut employers should wait, and all are encouraged to apply through their local lender.
- Be prepared to wait, and perhaps become a bit frustrated. The SBA is a tiny government agency that has been handed an absolutely massive task. Dispersing the money will take a while.
- Keep any emergency funds in a separate account to make accounting for them easier. That will be important when applying for loan forgiveness.
It’s important to stay on top of the news surrounding the CARES program. We will do our best to help provide you with new information as it becomes available.
If you’re an employer and have questions about labor and employment law, including matters related to the COVID-19, consider calling on the attorneys at Kainen, Escalera & McHale in Connecticut.
We do one thing and one thing only – we are an employer defense law firm – in fact, we are one of the largest employer defense law firms in the region. What’s more, each of our attorneys has over 25 years of experience in employment law and labor law matters and can provide your business with comprehensive legal counsel ranging from assistance with necessary preventive measures to trial advocacy. Please contact us if we can help you.
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