Blog #2 by Montgomery Dillavou CPA The Coronavirus Aid, Relief, and Economic Security Act or the CARES Act.
Free Money for Businesses Who Have Employees !!
In modern history we’ve never seen such aggressive action by the Federal Government to keep workers connected to their jobs and continue receiving their pay and other benefits like health insurance.
How much can businesses borrow ? Here is the calculation. Take your total payroll costs for the 12 months prior to your loan application, including employer taxes, group health care insurance premiums paid by the business and any benefits paid for sick, family or medical leave. Divide it by 12 to get a monthly average, then multiply that by 2.5. This is your maximum loan amount you can apply for.
Here's how the loan forgiveness works: Your company's expenses for the eight-week period after the origination of the loan will be analyzed.. Every dollar your company spent on payroll, utilities, rent, or interest on mortgage debt will be added together. That amount will be forgiven, up to the total amount your company borrowed through the program. Employees who earn more than $100,000 are exempt. In other words their pay is NOT part of the loan forgiveness. Note, this is for rent or Mortgage obligations entered into prior to Feb 2020. So don’t go buy or rent a new building now if you want these expenses forgiven.
There is one caveat, however. The amount that is forgiven will be reduced for businesses who lay off employees during the first eight weeks following the loan. Companies who reduce wages of employees by 25 percent or more will also have the forgivable amount reduced.
The good news is that businesses that have already let employees go before accepting the loan will not be subject to such penalties. And if those businesses rehire employees after accepting the loan, they'll receive additional credit to cover their wages.
How to Apply: https://www.sba.gov/funding-programs/disaster-assistance Start here and contact your banker at the same time. The loan app is completed and funded by your existing banking relationship.