The CARES Act and Small Business Loans and Unemployment Benefits
On Friday, March 27, the CARES Act was enacted into law.
What does this bill do?
This bill, among other things, is a stimulus package for small business owners.
The bill makes available $10 million for each small business, including $1 million that would be made immediately available.
These new funds will go from the U.S. government straight to local banks affiliated with the Small Business Administration (SBA), and then the funds will be sent out to small businesses.
Small and medium-sized businesses, who employ no more than 500 people, will be able to apply for a forgivable loan backed by the federal government to cover costs, worker’s salaries, and other expenditures. These loans are maxed out at $10 million per each business.
Of this $10 million cash pool, a $1 million “expedited loan” can be made available to each business in a matter of days.
Small businesses owners can then keep requesting loans from their remaining $9 million grant pool. These loans will be forgiven by the federal government as long the money is spent within the first eight weeks they were doled out — with the requirement that the business owners do not fire their employees.
Employers can continue using these funds until the end of 2020, and any remaining balance after eight weeks is put under a low-interest rate.
The U.S. government is creating a website that will allow people to submit their direct deposit information, allowing them to receive money directly into their bank account.
The bill also does the following things:
Creates a temporary Pandemic Unemployment Assistance Program.
Expands coverage to more workers, including self-employed, contractors, and furloughed workers.
Gives $600 each week in unemployment benefits for the next 4 months.
Gives an 13 additional weeks of unemployment benefits to unemployed folks.
Waives the normal one-week waiting period.
Includes funding to offset 50% of the costs of state and local government and non-profits for cost of paying unemployment to their workers.
Supports a short-time, work share programs as an alternative to layoffs.
Self-employed and independent contractors are eligible for the new program.
Self-employed and independent contractors are eligible for the Pandemic Unemployment Assistance Program.
Unemployed workers would get $600 each week.
Generally, a person’s benefits replace about 1/3 to 1/2 of their wages.
The CARES Act provides an additional $600 per week on top of whatever a person would normally receive in their state. This is limited to the next 4 months (expires July 31, 2020). This will end up providing a higher than average wage replacement rate for low-wage workers.
Further, the additional $600 in weekly benefits is designed to keep as many workers as whole as possible through the emergency. Some may temporarily receive more benefit than their paycheck – though that number is very small compared to everyone receiving Unemployment. Of course, people receiving Unemployment do not receive health insurance, retirement or other important benefits that can be available at work. The temporary $600 is only available through July 31.
An unemployed person can get these benefits for quite a while.
Most states provide access to unemployment benefits for a maximum of 26 weeks.
The CARES Act provides federal funding for an additional 13 weeks for those who need it. Funding for this expires December 31, 2020.