U.S. Federal Government COVID-19 Economic Stimulus Bill “CARES Act”
Paycheck Protection Program for American Small Businesses
The COVID-19 pandemic is an unprecedented public health and economic challenge, and Copart understands the intense pressure your business faces during this difficult period. We hope that you and your loved ones are healthy and well. We value our business relationship with you and want to help.
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What Is It?
The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.
The Paycheck Protection Program is designed to provide a direct incentive for small businesses to keep their workers on payroll by providing each small business a loan up to $10 million for payroll costs, employee benefits and leave, mortgage interest payments, debt refinancing, rent and utilities.
If all employees are kept on payroll for eight weeks, SBA will forgive the portion of the loans used for payroll, rent, mortgage interest, or utilities. Up to 100 percent of the loan is forgivable.
Who Qualifies?
Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.
Generally, “small business” means businesses with up to 500 employees (including their “affiliates”—i.e., firms under common ownership or control) unless an applicable size standard for an industry (i.e., NAICS code) allows for a greater number of employees.
How Do I Apply?
The Small Business Administration is working on emergency regulations to implement the Paycheck Protection Program, which are expected no later than April 11, 2020. Copart recommends that you check the SBA COVID-19 resources web page for updates on how to apply, and additional details on funds availability at the following website: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
Example
An automotive small business with fewer than 500 employees and an average monthly payroll of $200,000 applies for a Paycheck Protection Program loan with its bank. After confirming that the COVID-19 virus has adversely impacted its operations, the business receives a loan of $500,000. Over the next 8 weeks the small business determines that it has incurred $425,000 in eligible expenses for payroll, rent and utilities. The principal balance of the loan is reduced to $75,000 and amortized over 10 years at an interest rate not higher than 4%. The first loan payment is due 12 months later. The program bars SBA from charging fees to the borrower and the lender.
