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How to Apply for a loan under the CARES Act

What loans or protections are available?

These are low-interest (3.75% for small businesses and 2.75% for nonprofits) loans with terms potentially as long as 30 years. You can apply for a Small Business Administration (SBA) loan through its website. Be prepared to provide the following information:

  • Tax Information Authorization (IRS Form 4506T), completed and signed by each principal or owner
  • Recent federal income tax returns
  • Personal Financial Statement (SBA Form 413)
  • Schedule of Liabilities listing all fixed debts (SBA Form 2202)
  • You may also need to provide profit and loss statements, recent tax returns and balance sheets

After you apply, the SBA will review your credit before conducting its own inspection to verify your losses. The SBA says its goal is to arrive at a decision on any disaster loans within two to three weeks. If it determines you are eligible, it will send you a loan closing document for your signature.

Who is Eligible?

Small businesses, non-profits, tribal businesses, and veterans’ organizations are eligible if they:

  • Have fewer than 500 employees or the applicable SBA size standard for the industry, or
  • Are sole proprietors, self-employed individuals, or independent contractors
  • Were operating on February 15, 2020

Maximum Loan Amount

Loans can be up to two-and-a-half times the average monthly payroll costs for the business for the previous year, not exceeding $10 million. The measurement period for new business is January 1 to February 29, 2020.

Payroll costs include the total payments for employee compensation from:

  • salaries, wages, commissions, or similar compensation;
  • cash tip or equivalent payments;
  • vacation, parental, family, medical, or sick leave payments
  • dismissal or separation allowances
  • group health care benefits, including insurance premium payments
  • retirement benefit payments
  • state or local taxes assessed on the compensation of the employee

Payroll costs do not apply to the following:

  • Employee/owner compensation over $100,000
  • Employee income tax deductions
  • Employer FICA and FUTA payments
  • Railroad retirement taxes
  • Compensation of employees that principally reside outside the U.S.
  • Qualified sick and family leave credits allowed under the Families First Coronavirus Response Act sections 7001 and 7003

Loan Usage

Disaster loan payments are permitted to be used for:

  • Payroll costs (as designated above)
  • Health care benefits, including paid sick, medical, or family leave, and insurance premiums
  • Mortgage interest obligations
  • Rent obligations
  • Utility payments
  • Interest on any other debt obligations incurred prior to Feb. 15, 2020

Loan Forgiveness

Businesses using these loans are eligible to have them forgiven for an 8-week period after the loan date by applying through your lender. The application must include:

  • Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings.
  • Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities
  • Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.

The forgiveness amount is equal to the sum of the following costs incurred during the 8-week period:

  • Payroll costs (compensation above $100,000 excluded)
  • Payment of interest on mortgage obligation
  • Rent obligations
  • Utility payments

The loan forgiveness amount will be proportionally reduced if your average employee count declines during the covered period as compared to the same period in 2019.

Update: borrowers must spend at least 75% of their loans on payroll costs to qualify for loan forgiveness. Any employees previously Furloughed or laid off, employers must restore to at least 90% of their work force by early June.

How to Apply for a Paycheck Protection Loan

Paycheck Protection Loans are 100% guaranteed by the SBA, but an SBA lender, possibly the company’s current lender or bank, will create and underwrite the loan. Contact your lending institution or the SBA website for assistance.

More information is available from the U.S. Chamber of Commerce. For those with Questions in Nevada, you can also contact the Offices of Representative Susie Lee at 702.963.9336

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