The President signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law on March 27, 2020. The idea for the CARES Act is to reduce the financial burden of the COVID-19 pandemic and boost the economy with a 2.1 trillion dollar implantation.

Cares Act
In addition to different things, the CARES Act amends Section 7(a) of the Small Business Act making the “Check Protection Program (the “Program”). The Program extends relief to a segment of small organizations than those that would otherwise be ineligible to get SBA 7(a) loan advances. The Program will apply retroactively from February 15, 2020, until June 30, 2020, below are a couple of highlights:
  • The Programme applies to nonprofit organizations, veterans organizations, and tribal companies with 500 or fewer employees; individuals who work as sole proprietors or as independent contractors, as well as eligible self-employed individuals; organizations with a NAICS code beginning with 72; and certain foundations.
  • Payroll taxes, expenditures associated with the continuance of group medical care benefits, employee pay, and commissions, interest payments on mortgage duties, rent, utilities, and interest on commitments made prior to the commencement of the program are all eligible uses for covered loans. A covered loan credit can also be utilized to refinance a loan taken out on or after January 31, 2020, as well as the date the “covered loan” became available.
  • The maximum loan size is generally set to the lesser of $10 million or 2.5 times the average total monthly payments for payroll expenditures throughout the loan credit term. Salary (excluding remuneration for an individual worker in excess of $100,000), wage payment, commissions, separation payments, installments for group health and retirement benefits, and installments of state or municipal work assessments and pay are all examples of financial charges.
  • A loan’s interest rate will not surpass 4% percent. Moneylenders will grant installment postponement to credit installments (including the main amount, premium, and costs) for at least a half year and up to a year.
  • Recipients are eligible for forgiveness on a covered loan advance in the amount of the entire amount spent on covered costs during the first eight weeks of credit. Payroll, rent, utilities, and mortgage interest are among the expenditures that are paid. Loan forgiveness may be conditional on a decrease in headcount or compensation.
  • Borrowers must make a good faith certification that: (I) “uncertainty of current financial conditions” necessitates the loan; (ii) funds will be used to retain workers and maintain payrolls, among other permitted uses; (iii) the recipient does not already have a pending application for the same reason and duplicative of amounts applied for or received under a covered loan; and (iv) the recipient has not received amounts for the same reason from February 15, 2020, to December 31,

The CARES Act also modifies a few elements of the FFCRA (Families First Coronavirus Response Act). In addition to several technical improvements, the CARES Act makes a few of substantial amendments to the FFCRA that organizations should be aware of:

  • Employers may opt to go above and beyond the financial constraints for Paid Leave. The CARES Act amends the previous text to clarify that a firm “won’t be required to pay more than” the FFCRA’s monetary restrictions.
  • Employees who have been rehired are now eligible for FMLA leave. A rehired employee is eligible for paid FMLA leave if (i) they were laid off on or after March 1, 2020, and (ii) they worked for the firm for at least 30 of the 60 days before the layoff.
  • Employers can request that expected tax credits and refunds for paid sick leave and paid FMLA leave be paid in advance.

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