Neumann Law Group is ready to assist small businesses and self-employed individuals prepare for the anticipated second round of funding to the federal Paycheck Protection Program, as well as helping our clients navigate the application process following Congressional action. Although the content of what is being called an “interim stimulus package” remains the subject of considerable debate, nearly all economists and business leaders agree the measure is crucial to mitigate the shocking unemployment crisis facing the United States.
On April 16, 2020, the U.S. Small Business Administration’s website notified businesses that the agency was no longer accepting new applications for the Paycheck Protection Program. The recently passed CARES Act, otherwise referred to as the third stimulus package, earmarked $349 billion dollars for the U.S. Small Business Administration to distribute to small businesses, defined as having less than 500 employees—calculated by the average number of employees over the preceding twelve months.
The Paycheck Protection Program offers businesses a loan up to $10,000,000. The principal amount of each applicant’s loan is calculated at 2.5 times the company’s average monthly payroll costs for the previous one year. The loans are subject to complete forgiveness if used for qualifying expenses, which include:
- Owner’s compensation up to $100,000, annualized as calculated by net profit;
- Employee payroll costs (subject to a $100,000/year annualized cap per employee);
- Mortgage interest payments on business obligations related to real or personal property; and
- Business rent and utilities payments.
Given the unrelenting punishment COVID-19 has visited upon the United States economy, many businesses’ survival depends upon federal assistance—particularly as it relates to employee payroll. Where many businesses are not generating revenues commensurate with payroll expenses, the only option outside of government aid is to furlough or lay off employees, further compounding unemployment and compromising millions of American’s ability to meet basic financial obligations.
Between April 3 and April 16, approved lenders made over 1.6 million loans under the Paycheck Protection Program. However, the $349 billion allocated by Congress evaporated in thirteen days. Business leaders across the country are demanding additional funding, warning that a failure to fully fund all qualifying loan applications will not only create arbitrarily disparate outcomes for millions of small businesses but could deal a fatal blow to the nation’s economy.
Lawmakers are presently debating additional funding. Both parties acknowledge the need to allocate additional money to the Paycheck Protection Program, yet debate continues on whether additional stimulus measures should be included in the same bill. Republicans want to pass a limited bill that only funds additional lending by the Small Business Administration. Democrats want a larger package, including additional assistance for state and local governments and hospitals, as well as broadening the Supplemental Nutrition Assistance Program (S.N.A.P.), providing food benefits to vulnerable citizens.
Presently, all indications are the entire $349 billion allocated to the Small Business Administration has been distributed. Many businesses that were approved for loans hoped that the program’s cut-off only applied to prospective loans and not those already in the pipeline. This does not appear to be the case. If a business did not receive its loan proceeds by April 16th, it should anticipate receiving nothing unless Congress allocates additional monies to the program.
Neumann Law Group stands ready to assist small businesses prepare for the Paycheck Protection Program’s renewal. From the inception of the program through its present funding crisis, we have fielded numerous queries regarding the program and worked hand in hand with existing clients trying to secure a loan. We have not only familiarized ourselves with the CARES Act but also the application process itself. Although the program is presently on hold, all indications are that more funding will be designated in the (hopefully) near future. If you own a business or are involved in the strategic decision making of a company, contact the experienced attorneys at Neumann Law Group for a free consultation.