Under the CARES Act, billions of dollars are being directed through banks and other lenders to small businesses in the Paycheck Protection Program designed to keep workers on payroll through the COVID-19 crisis, while billions more go to Pandemic Unmployment Assistance , or PUA, benefits for those laid off or working reduced hours.
President Donald Trump signed the $2 trillion Coronavirus Aid, Relief and Economic Security Act into law March 27 after it was approved with large bipartisan majorities. In fact, the final Senate vote was unanimous. The two aspects described here are funded through different programs, with the $349 billion Paycheck Protection Program being operated by the Small Business Administration, or SBA, while unemployment insurance benefits, including PUA, are administered by the U.S. Department of Labor through the states' labor departments.
The SBA announced that it was launching the Paycheck Protection Program through its network of lenders, including banks, credit unions and similar financial institutions, Friday. These are very low-interest loans that will be forgiven, in effect turning into grants, for up to eight weeks worth of payroll and other costs, in many cases. “These loans will bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees,” SBA Administrator Jovita Carranza said in the press release. “We urge every struggling small business to take advantage of this unprecedented federal resource – their viability is critically important to their employees, their community, and the country.”
The loans, 100% backed by SBA, are being provided to small businesses without collateral requirements, personal guarantees, SBA fees or "credit elsewhere" tests, the agency announced.
Organizations eligible for the program include small businesses, certain non-profits, veterans’ organizations, self-employed individuals, independent contractors and other businesses meeting size standards based on their North American Industry Classification System code.
As with other SBA programs, most businesses with up to 500 employees are considered "small businesses," and in some cases even larger employers are eligible.
Just 1% interest
The Paycheck Protection Program’s maximum loan amount is $10 million with a fixed 1% interest rate and maturity of two years.
The loans are available to cover up to eight weeks of average monthly payroll (based on 2019 figures) plus 25%, and payments will be deferred for six months, although interest does accrue, the announcment stated.
As mandated by the CARES Act, the SBA will forgive the portion of loan proceeds used for payroll costs and other designated operating expenses for up to eight weeks, provided at least 75% of loan proceeds are used for payroll costs.
Eligible expenses for the eight-week forgiveness include:
• Payroll costs (excluding the prorated portion of any compensation above $100,000 per year for any person). But payroll costs include salary, commissions, tips, state and local payroll taxes and certain employee benefits including sick leave and health care .
• Mortgage interest (not prepayment or principal payments) and rent payments on mortgages and leases in existence after February 15, 2020;
• Utilities such as electricity, gas, water, transportation, phone and internet access for services that began before February 15, 2020; and
• Additional wages paid to tipped employees.
“The basic purpose is to incentivize small businesses to not lay off workers and to then rehire laid-off workers that lost jobs due to the COVID-19 disruptions," U.S. Rep. Rick Allen, R-Georgia 12th District, said in a press conference last week.
He called the Paycheck Protection "“the most important provision in the new stimulus bill for the majority of small businesses.”
Meanwhile, the Pandemic Unemployment Assistance, or PUA, program, increases unemployment benefits and extends them to a maximum of 39 weeks for people affected by COVID-19-related layoffs, furloughs and work reductions. The U.S. Department of Labor, in a news release Monday, announced that it was issuing guidance to the states about the program in a document called Unemployment Insurance Program Letter (UIPL) 16-20.
Under PUA, individuals who do not qualify for regular unemployment compensation and are unable to continue working as a result of COVID-19, such as self-employed workers, independent contractors and gig workers, are eligible for the federally funded benefits, the U.S. Department of Labor's release noted.
Benefies are for people "otherwise able to work and available for work within the meaning of applicable state law, except that they are unemployed, partially unemployed, or unable or unavailable to work due to COVID-19 related reasons, as defined in the CARES Act," the release states.
Benefit payments under PUA are retroactive, for weeks of unemployment, partial employment, or inability to work due to COVID-19 reasons starting Jan. 27, 2020 or later.
Statesboro Mayor Jonathan McCollar issued a release of his own last week, stating that he had received many calls from concerned citizens about unemployment benefits because of the pandemic.
“Unemployment benefits often replace 40 to 45 percent of a worker’s weekly compensation,” McCollar said. “The CARES Act will go a long way in helping to fill that 60 percent gap for workers. I know the act only provides temporary relief to our community, but I hope this will be the first of many steps taken by federal and state government to see our nation through this trying time.”
Information on individual and employer-filed unemployment applications, and the forms, can be found on the Georgia Department of Labor website, dol.georgia.gov.