LEE COUNTY, FL ( March 27th, 2020)
CARES Act Update
We are closely monitoring the progress of the CARES Act (Coronavirus Aid, Relief and Economic Security) Act. The
CARES Act is in the legislative process and anticipated to be signed into law in the coming days. Important note: these
programs are NOT available until signed into law by the President.
The sections of the stimulus bill that are relevant to small business lending:
– $350 billion in loan forgiveness grants through community banks to small businesses and non-profits to maintain
existing workforce and help pay for other expenses like rent, mortgage, and utilities. The loans would be available
during an emergency period ending June 30, and would be forgiven if the employer continued to pay workers for
the duration of the crisis.
– $10 billion for SBA emergency grants of up to $10,000 to provide immediate relief for small business operating
– $17 billion for SBA to cover 6 months of payments for small businesses with existing SBA loans.
The section 7(a) grants are the bulk of the funding and are the vehicle for forgivable loans, so a deeper dive on
– Establishes the maximum 7(a) loan amount to $10 million through December 31, 2020 and provides a formula by
which the loan amount is tied to payroll costs incurred by the business to determine the size of the loan.
– Specifies allowable uses of the loan include payroll support, such as employee salaries, paid sick or medical leave,
insurance premiums, and mortgage, rent, and utility payments.
– Increases the government guarantee of 7(a) loans to 100 percent through December 31, 2020, at which point guarantee percentages will return to 75 percent for loans exceeding $150,000 and 85 percent for loans equal to or less
– Allows complete deferment of 7(a) loan payments for at least six months and not more than a year, and requires
SBA to disseminate guidance to lenders on this deferment process within 30 days.
– Requires the SBA to provide a lender with a process fee for servicing the loan. Sets lender compensation fees at
five percent for loans of not more than $350,000; three percent for loans of more than $350,000 and less than
$2,000,000; and one percent for loans of not less than $2,000,000.
And specific to loan forgiveness, Section 1106:
– Establishes that the borrower shall be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date of the loan on payroll costs, interest payment on any mortgage incurred prior to February 15, 2020, payment of rent on any lease in force prior to February 15, 2020, and payment
on any utility for which service began before February 15, 2020.
– Amounts forgiven may not exceed the principal amount of the loan. Eligible payroll costs do not include compensation above $100,000 in wages. Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8 week period compared to the previous year or time period, proportionate to maintaining employees and wages:
– Payroll costs plus any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation + and any covered utility payment.
– The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior
year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. To
encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the
– Allows forgiveness for additional wages paid to tipped workers.
– Borrowers will verify through documentation to lenders their payments during the period. Lenders that receive the
required documentation will not be subject to an enforcement action or penalties by the Administrator relating to
loan forgiveness for eligible uses.
– Upon a lender’s report of an expected loan forgiveness amount for a loan or pool of loans, the SBA will purchase
such amount of the loan from the lender.
– Canceled indebtedness resulting from this section will not be included in the borrower’s taxable income.
– Any loan amounts not forgiven at the end of one year is carried forward as an ongoing loan with terms of a max of
10 years, at max 4% interest. The 100% loan guarantee remains intact.
For the most up-to-date information about COVID-19 statewide, please visit the Florida Department of Health’s dedicated COVID-19 webpage.
The Florida Department of Health hosts a new COVID-19 Case Dashboard. To keep Florida residents and visitors safe, informed and aware about the status of the virus, this dashboard will be updated twice daily.
For any other questions related to COVID-19 in Florida, please contact the state’s dedicated COVID-19 Call Center by
calling (866) 779-6121. The Call Center is available 24 hours per day. Inquiries may also be emailed to COVID19@flhealth.gov.
Additional resources for businesses impacted by COVID-19.
Florida Small Business Emergency Bridge Loans: http://floridajobs.org/rebuildflorida/businessrecovery
SBA Economic Injury Disaster Loans: https://disasterloan.sba.gov/ela
Lee County Government COVID-19: https://www.leegov.com/covid-19/
Lee County Economic Development Office: https://leecountybusiness.com/
Florida SBDC: http://floridasbdc.org/services/business-continuation
SWFL CareerSource https://careersourcesouthwestflorida.com/