Updates and Information Concerning the CARES Act and the Paycheck Protection Program
On March 27, Congress passed a $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act that provides $349 billion for the Paycheck Protection Program (PPP) to specifically help small businesses keep their workforce on the payroll or to rehire workers. PPP applications opened on April 3, 2020.
Of note, on April 16 it was announced that PPP funding has been fully utilized and additional funds cannot be expended under current law, but future aid packages could extend funding. The California Avocado Commission will keep growers updated as information is made available.
Since its passage, there have been some new developments concerning the PPP. Below are highlights:
- Eligible borrowers include businesses in all industry sectors, in operation as of February 15, 2020, who have 500 or less employees who reside in the U.S. (or businesses with more than 500 employees who meet the Small Business Administration (SBA) size standard for their industry).
- Eligible borrowers also include sole proprietorships, independent contractors or those who were self-employed by February 15, 2020
- Lenders will include banks, credit unions and other regulated lenders, with loans backed by 100 percent SBA loan guarantees. SBA is likely to offer a tool to find PPP lenders soon.
- PPP loan size is determined by the business’s typical pre-COVID-19 monthly payroll times 2.5, not to exceed $10 million.
- The loan will be fully forgiven if the funds are used as follows:
- More than 75 percent of the loan proceeds must be used for payroll and health care benefits for employees whose principal residence is in the U.S., including the re-hire of recently laid-off employees, through June 30, 2020. Seventy-five percent of the PPP loan size equates to 8 weeks of payroll.
- Less than 25 percent of loan proceeds may be used for:
- Interest due on mortgages incurred prior to February 15, 2020.
- Rent due on leases in place before February 15, 2020.
- Utility services in place before February 15, 2020.
- Loan forgiveness is based on the employer maintaining/rehiring employees and maintaining salary levels. If full-time headcount declines or salaries/wages decrease, forgiveness will be reduced. If PPP proceeds are used for any other purposes than those stated above, the funds for the unauthorized uses would need to be repaid.
- Eight weeks after a PPP loan is made the business must provide documentation to the lender noting the number of employees on their payroll and how the PPP funds were used.
- Loan payments will be deferred for six months, during which time interest will accrue, and no collateral or personal guarantees are required. There is no prepayment penalty.
- No fees will be charged by the government or lenders.
- Loans will have a two-year maturity and a 1 percent interest rate.
For more information about the PPP, growers can refer to the following:
AmericanHort is hosting webinars and uploading recordings of the webinars, as well as PowerPoint slides, to their Coronavirus Resource Center. The videos include a recent webinar concerning the CARES Act: Loans, Grants and Business Relief, as well as a video concerning the Families First Coronavirus Response Act as related to tax and labor questions.