Insights From Our Editors

COVID-19 Relief Package: How to Optimize It

By Mark Wright, OD, FCOVD,
and Carole Burns, OD, FCOVD

April 1, 2020

The Coronavirus Aid, Relief and Economic Security (CARES) Act was passed by Congress and signed by the President. It is now law. The CARES Act promises businesses with less than 500 employees the ability to receive a loan that is really a grant – that is, you don’t have to pay it back – if the business follows certain criteria.

We’ve already seen banks offer loans that are SBA loans that are, in essence, no different from previous SBA loans. In other words, when you read the fine print you need to pay back the loan. These loans were marketed as easier to apply for and can be used to keep your practice afloat. So, beware and read the fine print. Make sure you are applying for a loan that is covered by the CARES Act.

It is also important to understand the way laws work. The actual working of the law is that once it is passed, the implementation of the law is a combination of the law itself and how it is interpreted by the federal agency administering the law – in this case, the Small Business Administration (SBA). The SBA has not created and transmitted to banks the rules that the banks must follow to make this law work. The SBA rules should be published this Friday.

Here is the essence of the CARES Act:
1) You must have been in operation on February 15, 2020.

2) If you are a small business owner with less than 500 employees, self-employed, or an independent contractor, you qualify for the loan.

3) If you have fewer than 500 employees, you can apply for a maximum loan amount of 2.5 times your monthly payroll expense.

4) Every qualifying dollar that you spend on the following expenses for eight weeks will be completely forgiven if you spend it on the following:

a. Payroll costs – There are two qualifications:

i. There is a salary cap of $100,000 (e.g.: If an employee’s annual salary is $175,000 then only $100,000 is covered) prorated for the covered period.

ii. The employee must remain employed by your business through June 30, 2020.

b. Payments of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation)

c. Payments on any covered rent obligation

d. Covered utility payments

The expectation is that the loans will be approved as quickly as 1-2 weeks from the date of application.

As we learn more, we will pass it on to you.

References
i. https://www.congress.gov/bill/116th-congress/house-bill/748/text

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