COVID-19 UPDATE: The CRA's Guide to the CARES Act April 02,2020
President Trump signed the CARES Act, or federal relief package, into law on March 27. While we are now getting some guidance as to how individual pieces of this act will work, we are still missing some details on how this will be administered. We expect rules to be rolled out soon. Keep in mind that this was a fast-moving piece of legislation that was put together in 10 days, and is an 850+ page document. We've compiled everything we do know now here, which includes information on what restaurants need to know about the Paycheck Protection Program and Economic Injury Disaster Loans, and how they can apply for each. We'll be adding these resources to our website, linked on the Coronavirus Resources page, and adding to them as we learn more.
More About the CARES Act
- National Restaurant Association Summary: click here.
- National Restaurant Association Analysis for restaurants: click here.
- Messner Reeves attorneys Torben Welch and Rachel Farr covered the details of the Paycheck Protection Program and Economic Injury Disaster Loans in a webinar with the CRA on March 31. They also covered how to apply, and qualifications for these key pieces of relief. Read the notes, updated 4/3/20, here. Listen to the full webinar here. A follow-up Q&A is forthcoming. In the days after the call, they received the Paycheck Protection Program fact sheet, which added four key pieces of information to what they already knew, and further guidance, which you can see here, that changes some of thedetailsofPPP. Although these new rules need to remain open for comment for the next 30 days (making them subject to change), we expect this to be the last round of changes to the Act. Here are some things that have changedsinceourwebinar:
- Although we do not expect the PPP funds to run out, the SBA has suggested that businesses get their applications in as quickly as possible to prevent backlog.
- Employees earning more than $100k annually will be included in payroll costs, but capped at the pro-rata rate for the 2 months (ie. $8,133 per month).
- To be eligible for 100% forgiveness, 75% of the funds must be used for payroll (i.e. only 25% can be used for rent, insurance, etc.).
- Interest Rate will be 1.0%, not 0.5%
- 1099 Contractor Payments are NOT to be included in the Payroll Costs calculation (Discussions are ongoing as the CARES Act does contemplate including payments to contractors in payroll costs – members should check with their bank at the time of application when calculating payroll costs absent additional guidance)
- SBA approved lenders can begin accepting applications on April 3, 2020, however, some banks (including Chase Bank) are not currently accepting applications but will likely next week once additional clarifications are made.
When you are calculating payroll costs for PPP, you are permitted to include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
- State and local taxes assessed on compensation; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
We suggest that you come prepared with payroll costs for each month of 2019, although some lenders may only look at February-June in 2019 to calculate your loan amount. This will vary by lender; it is better to come prepared to have your loan processed as quickly as possible. Be prepared to provide documentation proving all the elements (listed above) you wish to include in your loan calculation.
- National Restaurant Association Public Affairs team webinar recording: click here.
- Small Business explanation: click here.
- Small Business Owner's Guide to the CARES Act: click here.
- Section-by-section explanation: click here.
- Clarification on rehiring and PPP forgiveness, click here.
Apply for Funds
- Paycheck Protection Program Application: click here. Note that you must submit the PPP Application through a lender that offers SBA loans. Lenders may begin processing applications April 3, 2020.
- Paycheck Protection Program fact sheet for borrowers: click here.
- Restaurant-to-Restaurant PPP lending recommendations: click here.
- Economic Injury Disaster Loan (EIDL) Portal: click here.
- Small Business Development Centers, which can help with applications: click here.
- 100 most active SBA lenders: click here.
- SBA loans
- US Department of Treasury’s CARES Act page: click here.
- US Department of Treasury’s Paycheck Protection Program page: click here.