Since the webinar delivered by National Medical on Monday, March 30, 2020, a few changes were made by the SBA as it relates to the initial publication of The CARES Act. The major changes include:
- It initially appeared that the SBA was going to allow all borrowers to include wages for independent contractors
(up to $100,000 annually per independent contractor) in their formula to determine what loan amount they could receive. In
the “Interim Final Rules” published by the SBA on April 2, 2020, they indicated that independent contractors cannot be included as
employees for this purpose as they can file their own separate applications.
- The SBA initially indicated, for the amount of the loan that is ultimately not forgiven and converts into a loan at the end
of the 8 week loan period, that such loan would become a 10 year, non-recourse loan at no more than 4%. The final rules on
this changed, and the loan will now be a 2 year, non-recourse loan at 1%.
- With respect to the loan forgiveness component of The Act, initially it simply indicated that any monies spent, over the 8
week loan period, on payroll costs and benefits, plus rent/mortgage interest, and utilities, could be applied against the loan
to determine how much would be forgiven. The new ruling was modified to indicate that no more than 25% of the loan could be
forgiven by the non-payroll expenses, as the goal of this program is to encourage higher levels of pay and employment.
Finally, as you all likely know by this time, Treasury Secretary Mnuchin announced that all lenders would be open to accept and process applications on Friday, April 3rd. However, based on late changes to The CARES Act, plus significant technology challenges related to the SBA website and its loan app, very, very few applications were received and processed on Friday, April 3rd. Our information tells us that the SBA has been working in conjunction with Amazon Web Services to fix all such technology issues, so that the lenders are in position to submit the loan applications to the SBA early this upcoming week. Stay tuned, but we feel optimistic that this process will get smoothed out and that the small businesses across the nation soon be able to obtain some financial relief from this Act.
If you have any questions, or need any help, please feel free to reach out to us at National Medical.
This post was first published April 6, 2020 and was updated July 29, 2020.