What relief currently exists, and what changes with the new CARES Act?
- The ability to borrow up to $10,000,000 or the business’s average total monthly payroll costs including salaries, sick leave, state and local payroll tax payments, and insurance premium costs over the preceding 12-month period from the loan origination date multiplied by 2.5. One caveat here is that any wages for employees who earn more than $100,000 per year will not be eligible for consideration in the total calculation
- For example, if you have an average payroll cost of $50,000 per month from April 1, 2019 to March 31, 2020 for employees who earn less than $100,000 annually, you would be eligible for $125,000.
- The total loan received can be used towards paying:
- Rent and utilities
- Interest and debt obligations
To be eligible for the 7(a) loans you must meet a list of specific criteria
- Your organization must have been operating on February 15, 2020
- Your organization must have had employees who were paid salary and payroll tax, or hired on as independent contractors
- Your organization must have been substantially impacted by public health restrictions related to COVID-19
- Your organization must make a good faith certification that you have indeed been affected by COVID-19 specifically and
- That funds will be utilized to retain workers, maintain payroll, and make payments on outstanding debt obligations
- Personal guarantees on the loan will not need to be made during the covered period, and collateral will not need to be put up to back the loan.
- Banks and other institutions that will be originating these 7(a) loans will receive government guarantees up to 100% through December 31, 2020. After that date, guarantee percentages would return to 75% for loans exceeding $150,000 and 85% for loans equal to or less than $150,000.
- Loan payments can be deferred completely for a period not to exceed one year.
- Guidance for deferment will be managed and released through the SBA.
- All fees associated with loans, both on the borrower and lender side for all 7(a) loans would be waived.
How should optometry practices think about using this relief loan?
How to apply for a Coronavirus Relief Loan
- April 3, 2020: Small businesses and sole proprietorships can start applying
- April 10, 2020: Independent contractors and self-employed individuals can start applying
I will be following this legislation, and will report and update this article as updates become available. Please note that I am neither a legal expert nor a political expert, and this article is for informational purposes only. Additionally, I cannot guarantee the accuracy of this information. If you have any questions, I’d be happy to engage in the comments below.
CovalentCareers is committed to supporting optometrists and optometry students during the Coronavirus pandemic. For more optometry-specific resources and information, visit our Optometry COVID-19 Resource Center.