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Keeping American Workers Paid and Employed Act

Featured Keeping American Workers Paid and Employed Act

These guidelines may be subject to change and will be superseded by any SBA guidance.

Summary

This law allows businesses under 500 employees (including independent contractors and self-employed) to receive:

1. Emergency grants up to $10,000 received within three (3) days of SBA verifying borrower’s eligibility

a. What is this program called?

i. Emergency Economic Injury Disaster Loan Grants (Emergency EIDL Grants)

b. Who is eligible?

i. businesses under 500 employees that are negatively impacted by the COVID-19 pandemic
ii. Other organizations negatively impacted by the COVID-19 pandemic:

  • Independent contractors and self-employed people
  • Nonprofits (501(c)(3)s
  • Veterans organizations, or
  • Tribal business concerns.

c. How do you get it?

i. Apply for an EIDL loan and request an advance up to $10,000. You will need to self-certify your eligibility and apply directly to the SBA. The SBA will provide additional guidance in the future on how to self-certify and apply: https://www.sba.gov/

d. Eligibility requires good faith certification that:

i. Uncertainty of current economic conditions makes the loan necessary
ii. Funds will be used to:

  • retain workers
  • maintain payroll
  • make mortgage payments or lease payments, or
  • make utility payments.

iii. You don’t apply twice for the same Emergency EIDL loan (i.e., no double-dipping)
iv. You haven’t already received an Emergency EIDL loan for the same purpose.

e. What can you spend it on?

i. Payroll, mortgage, rent, and other operating expense while waiting for Paycheck Protection Loans or traditional EIDL loans to be processed

f. Do you have to pay it back?

i. No

g. Do you have to demonstrate that you can’t get credit elsewhere?

i. No, not for these emergency grants related to the COVID-19 pandemic. For ordinary SBA 7(a) loans you do.

h. Who is NOT eligible for an Emergency EIDL grant?

i. Employers with more than 500 employees;

a. Exception if the SBA determines a different standard size in that industry

ii. Employers who have not been negatively impacted by the COVID-19 pandemic

a. For example, if your employees are able to continue their work from home, then you don’t need this Emergency EIDL grant.

iii. Employers that have already gotten or applied for one of these Emergency EIDL grants

iv. Non-profits not allowed under existing SBA guidelines

a. For example, nonprofits that “provide services of a government nature” are not allowed to apply for these grants.

2. Forgivable loans up to $10 million.

a. What is this program called?

i. Paycheck Protection Program: This program is intended to help small and medium-sized businesses maintain payroll and overhead through the next few months so that workers are not laid off and businesses are ready to thrive again once the COVID-19 pandemic has passed.

b. Who is eligible?

i. Most businesses under 500 employees that are negatively impacted by the COVID-19 pandemic:

  • Independent contractors and self-employed people
  • Hotels, restaurants, and other Accommodation and Food Services companies with more than 500 employees are still if the physical location doesn’t have more than 500 employees. (SBA will likely issue further guidance.)
  • Nonprofits (501(c)(3)s)

c. How much can you get?

i. Eight (8) weeks worth of payroll for full-time equivalent employees

a. Covers eight (8) weeks from the origination of the loan

b. Calculate the payroll amount by averaging either:

  • Your average number of full-time equivalent employees per month from February 15 to June 30, 2019 (in other words, the same period last year) x 2.5; or
  • Your average number of full-time equivalent employees per month from January 1 to February 29, 2020 x 2.5.

c. For seasonal employers, the SBA will determine the average employees per month based on February 15 to June 30, 2019.

d. How do you get it?

i. From SBA-certified lenders (banks, credit unions, etc.) See list of eligible lenders here: https://www.sba.gov/offices/district/ky/louisville/lender-reports/2019-k...

e. What can you spend it on?

i. Payroll (including to re-hire recently laid-off workers)

a. Up to an annual salary of $100,000/per employee. In other words, if your employee makes $200,000/year, you can only be forgiven for the amount up to the $100,000/year rate.

ii. Employee paid sick leave

iii. Employee healthcare

iv. Rent or mortgage interest (not mortgage principal)

v. Utilities

vi. Interest on other debt obligations

f. Do you have to pay it back?

i. No, as long as you spend it on the allowable costs, but you must apply for forgiveness. It is not automatic.
ii. If you borrow too much or you spend it on non-forgivable costs like mortgage principal, you will pay interest for up to ten (10) years at less than 4%.

g. Can you use both unemployment insurance for employees laid off and Paycheck Protection?

i. No, not at the same time.

h. Can I start a new business or expand my existing business with this money?

i. No, not with Paycheck Protection, but there may be other programs you could consider, such as the SBA Express Loans (see below).

i. What if I laid off employees?  Do I have to hire them back to qualify?

i. Not necessarily, but the forgivable part of the loan will be reduced if you don’t maintain previous levels of monthly employment (as measured by the averaging outlined above). The Paycheck Protection Program is intended to help small and medium size businesses maintain their levels of employment before the COVID-19 pandemic.

j. Do I have to keep all of my employees?  If so, what date is that measured by?

i. Not necessarily, but you only get loan forgiveness for the extent to which you maintain previous levels of employment (as measured by the averaging outlined above). If you used to employ ten (10) people and because of the COVID-19 pandemic, you now employ three (3), you don’t have to hire back the seven (7) people you laid off, but if you don’t, you only get Paycheck Protection assistance for the three (3) employees you still have. If you did hire back the seven (7) people who were laid off, you could get Paycheck Protection assistance for all ten (10) employees.

Other resources the law makes available:

1. Up to six (6) months of debt relief for existing SBA loans.

a, What is it?

i. The SBA will pay all principal, interest, and fees on the existing SBA loans of eligible borrowers for six months.

b. Who is eligible?

i. Existing SBA borrowers who have been negatively impacted by the COVID-19 pandemic.

2. SBA Express Loans of up to $1 million for eligible borrowers

a. What is it?

i. Line of credit for working capital of up to $1 million

b. Who is eligible?

i. Businesses that meet the criteria outlined here: https://www.sbaexpress.loans/sba-express-loan-requirements

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