CARES Act: Unemployment Benefits and Loans

Please refer to the following provisions of the federal CARES Act, which have been compiled here as potentially helpful to your business in the midst of the Coronavirus pandemic.

The CARES Act dramatically increased the role of the Small Business Administration (SBA) in efforts to assist U.S. businesses impacted by the COVID-19 crisis. Among the vehicles for these relief efforts are: extended unemployment benefits for self-employed individuals; and the SBA 7(a) Paycheck Protection Program loans and SBA 7(b)(2) Economic Injury Disaster Loans, both of which are available to businesses with 500 or fewer employees that have been negatively impacted by the crisis. Each of these additional provisions is explained below.

UNEMPLOYMENT BENEFITS FOR
SELF-EMPLOYED (SUBTITLE A OF TITLE II)

• Self-employed individuals, independent contractors, and other individuals who are unable to work as a direct result of COVID-19 public health emergency and would not qualify for regular unemployment benefits under state law may be eligible to receive “Pandemic Unemployment Assistance.”
  • This excludes individuals who have an ability to telework with pay or individuals who are receiving sick leave or other paid leave benefits.
• The unemployment assistance is available to individuals who are unemployed, partially unemployed, or unable to work for each week (up to 39 weeks) impacted as a result of COVID-19 between Jan. 27 and December 31, 2020.
• These benefits will be administered by the states, in accordance with this new Federal law.
• There is a maximum of 39 weeks of assistance, where the amount is equal to what is authorized under the state unemployment compensation law, plus an additional $600 per week for up to four months.

The first step is that the applicant must qualify.  An individual qualifies if (1) he/she is self-employed, seeking part-time employment, does not have sufficient work history or otherwise would not qualify for regular unemployment benefits; and (2) he/she self-certifies that they are unemployed or partially unemployed due to any of the following COVID-19 related issues:

• The individual has been diagnosed with COVID-19 or is experiencing symptoms and seeking a medical diagnosis;
• A member of the individual’s household has been diagnosed with COVID-19;
• The individual is providing care for a family member or household member who has been diagnosed with COVID-19;
• The individual is the primary caregiver for a child or other person in the household who is unable to attend school or another facility as a direct result of COVID-19;
• The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of COVID-19;
• The individual is unable to work because a health care provider has advised the individual to self-quarantine due to COVID-19 concerns;
• The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of COVID-19;
• The individual has become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19;
• The individual has to quit their job as a direct result of COVID-19; or
• The individual’s place of employment is closed as a direct result of COVID-19.

An individual does not qualify if he/she can telework with pay or if he/she is receiving paid sick leave or other paid leave benefits.  
Benefits are available from Jan. 27, 2020 through December 31, 2020 – not to exceed 39 weeks.

Benefits include the weekly benefit amount (calculated under Federal Law – because they would not qualify under state law), plus a weekly $600 supplement.

The weekly $600 supplement is available only through July 31, 2020.

CLICK HERE FOR THE NHES FORM TO FILE
CLICK HERE FOR THE NHES WEBSITE

SBA 7(a) PAYCHECK PROTECTION PROGRAM (PPP)
(Section 1102 & 1106)

• Businesses with 500 employees or fewer (or that qualify as a small business concern based upon the SBA’s size standard for the applicable industry), including sole proprietors and independent contractors, are eligible for SBA 7(a) loans in response to COVID-19 covering expenses for the period of February 15, 2020 through June 30, 2020. The CARES Act appropriates $349 billion to cover these loans.
• The loan amount will be 250 percent of the average payroll costs/month for the year prior to the loan, up to $10 million. For businesses not open yet in that period, the SBA will look at earlier receipts from 2020.
• 7(a) loans can be used for:
  • Payroll costs, including for independent contractors and employees who work on commission;
  • Rent/Mortgage interest;
  • Utilities; and
  • Interest on other debt obligations incurred prior to February 15, 2020.
• All or a portion of these loans will be forgivable for businesses that maintain at least 75% of the average payroll levels as in the previous year and certain employee levels based upon specified criteria; forgivable amounts phase out as employer’s payroll levels drop below that.
• The bill also increases the SBA “Express Loan” limit from $350 thousand to $1 million until January 1, 2021.

CPAs, attorneys and banks will need to be consulted in order to put an application together as there are many details in the law about how to calculate “average monthly payroll” and how to document the loan forgiveness calculation.

What does this mean for Realtors?

• Realtors who are negatively impacted by the COVID-19 crisis can apply for SBA 7(a) loans of up to $10 million to cover business operating costs, including payroll, during the crisis (500 employees or fewer or by SBA established industry size standard). (Section 1102)
• Small businesses and commercial tenants - clients of commercial practitioners - will be able to apply for these loans to cover business expenses, including rent and mortgage interest, during the crisis as well.
• A portion of the loans - that which goes toward payroll, rent, mortgage interest, and utilities - will be made forgivable for employers who maintain current salary levels (or bring staffing of full-time employees/salary levels back up by June 30 to pre-COVID-19 crisis levels). Employers who reduce their employee numbers or salaries will have the forgivable amount phased out, depending on their numbers. (Section 1106)

The Paycheck Protection Program is a significant benefit and should be looked at by members closely, as it is designed to provide a buffer during the slowdown anticipated during the next few months.

EMERGENCY ECONOMIC INJURY DISASTER
LOAN (EIDL) GRANTS (SECTION 1110)

• Businesses with 500 employees or fewer, or a small business concern under the SBA’s size standard, including sole proprietors, independent contractors, cooperatives and Employee Stock Ownership Plans are eligible for Economic Injury Disaster Loans (EIDL) during the covered period of January 31 to December 31, 2020 in response to COVID-19.
• The business must show hardship due to the Coronavirus.
• The Economic Injury Disaster Loans are available for up to $2 million dollars for businesses.
• During the covered period, SBA may determine loan eligibility based solely on the applicant’s credit score or use of an alternative appropriate method for determining an applicant’s ability to repay.
• The SBA must waive any personal guarantee on loan advances or loans under $200,000, the requirement that the applicant needs to be in business for the 1-year period before the disaster and that an applicant be unable to obtain credit elsewhere.
• Legislation provides $10 billion in funding to provide an emergency advance of up to $10,000, which is forgivable debt, to small businesses within 3 days of the business applying for the Economic Injury Disaster Loan (EIDL).
• The SBA may advance $10,000, which is forgivable debt, to small businesses within 3 days of the business applying for the Economic Injury Disaster Loan (EIDL).
• Economic Injury Disaster Loans may be used for the following:
  • Paid sick leave to employees impacted by COVID-19
  • Payroll
  • Rent/Mortgage Payments
  • Debt obligations due to loss revenues
  • Increased costs for due to chain supply disruptions and materials

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