Getting information to businesses is essential
For the past couple of weeks, the Fredericksburg Chamber of Commerce has been working to guide members to resources around best practice and financial assistance.
On Friday, the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act, a $2 trillion federal stimulus package, included $350 billion in funding for the Paycheck Protection Program. This initiative provides 100% federally guaranteed loans to small businesses who maintain their payroll during the pandemic emergency.
This could be a bit of a bright spot at the end of a hard month for many Gillespie County employers as these loans are forgiven if the employer maintains payroll or is able to restore payroll within the program guidelines.
While I want to share an overview of this program here, my column is not intended to be financial or legal advice. I strongly encourage employers to reach out to their existing team of business advisors — your banker, accountant, financial advisor and attorney — to help you understand if CARES and other programs available through the Small Business Administration is the right option for your business. Their existing knowledge of you and your business is invaluable.
While the program was initially rolled out to federally pre-approved 7A lenders, it is rapidly expanding. I have already been notified by several LOCAL banks that they have been added to the approved lender list and can provide assistance.
Under the Paycheck Protection Program, the majority of Gillespie County employers will fall within the eligibility requirements, which includes small businesses with fewer than 500 employees.
The program also allows franchise businesses to participate, provided they have fewer than 500 employees at that specific physical location. Sole proprietors (self-employed) and independent contractors can qualify, using their 1099 history to illustrate need. Additionally, 501(c)3 non-profits and 501(c)(19) veterans’ organizations may also participate if they have fewer than 500 employees.
Generally speaking, businesses can borrow 2.5 times of their average monthly payroll cost, not to exceed $10 million. The amount of loan forgiveness is equal to the amount the borrower spent on payroll costs and certain expenses during the eight-week period beginning on the date of loan origination.
In addition to forgiveness of payroll costs, the loan forgiveness amount can include interest on business mortgages, rent on lease agreements and payments on utilities. Business owners should compile their average expenses on these items when considering application.
Since the intent of the program is to keep workers on the job and provide employers with the resources to do so, it is important to note that a reduction of more than 25% to the number of workers employed or a reduction of more than 25% in wages will reduce the amount of loan forgiveness.
For employers that were forced to make employment reductions before the passage of CARES, the program allows those businesses to borrow and receive loan forgiveness if those workers are rehired before June 30, 2020.
The goal of the Chamber at this time is to provide our members with as much information and access to resources as possible, allowing business owners to focus on their business.
Please visit www.fredericksburg-texas.com for updates on a variety of business resources including CARES and SBA loan programs, implications of changes to the Family and Medical Leave Act, unemployment filing and a searchable list of changes in individual business operations.
We are all in this together. Keeping it local, helping those in need and taking every precaution to stay well is the fastest track to recovery.