CARES ACT...Disaster Relief

Here's a couple of items from the CARES ACT which the President signed into law today. These might be useful to small owner operators who are not focused on meeting employee payroll, because they have none. However, it appears that other options might be available.

The CARES Act makes the following additional changes to the SBA Disaster Loan program during the covered period for loans made in response to COVID-19:

• Waives rules related to personal guarantees on advances and loans of $200,000 or less for all applicants;
• Waives the "1 year in business prior to the disaster" requirement (except the business must have been in operation on January 31, 2020);
• Waives the requirement that an applicant be unable to find credit elsewhere; and
• Allows lenders to approve applicants based solely on credit scores (no tax return submission required) or “alternative appropriate methods to determine an applicant’s ability to repay.”

Entities applying for loans under the Disaster Loan Program in response to COVID-19 may, during the covered period, request an emergency advance from the Administrator of up to $10,000, which does not have to be repaid, even if the loan application is later denied. The Administrator is charged with verifying an applicant’s eligibility by accepting a “self-certification.” Advances are to be awarded within three days of an application.

Advances may be used for purposes already authorized under the SBA Disaster Loan Program, including:

• Providing sick leave to employees unable to work due to direct effect of COVID-19;
• Maintaining payroll during business disruptions during slow-downs;
• Meeting increased supply chain costs;
• Making rent or mortgage payments; and
• Repaying debts that cannot be paid due to lost revenue.

If an entity that receives an emergency advance transfers into, or is approved for, a loan under the SBA Business Loan Program (described in the section above), the advance amount will be reduced from any payroll cost forgiveness amounts.

The CARES Act would deem all states and their subdivisions to have sufficient economic damage to small business concerns to qualify for assistance under this loan program (rather than the current state declaration and certification approach).

LOAN PAYMENT SUBSIDIES FOR CERTAIN LOANS
This section covers loans –

• Guaranteed by the Small Business Administrator under:
  • The SBA Business Loan Program (including the Community Advantage Pilot Program, but excluding the new payroll loan program established under Section 1102); or
  • Title V of the Small Business Investment Act; or
• Made by an intermediary to a small business concern using loans or grants received under the SBA's Microloan Program.

With respect to these loans, it is the Sense of the Congress that the Administration, in addition to the SBA relief already provided under the CARES Act, "should encourage lenders to provide payment deferments, when appropriate, and to extend the maturity of covered loans, so as to avoid balloon payments or any requirement for increases in debt payments resulting from deferments provided by lenders" during the COVID-19-declared emergency.


Additionally, for these loans, the Administrator must pay (and relieve the borrower of any obligation to pay) the principal, interest, and any associated fees owed in a regular servicing status:

• For loans made before this bill is enacted not on deferment, for the six-month period beginning with the next payment due;
• For loans made before this bill is enacted that are on deferment, for the six-month period beginning with the next payment due after deferment; and
• For loans made within six months of enactment of this bill, for six months after the first payment is due.

 

No problem.

 

It's considered a "grant" evidently.

Sorry for highlighting certain sections of the article in red.

I usually hate ppl who highlight in red LOL