Senate CARES Act Could Grant Loan Forgiveness on Payroll Expenses

Senate CARES Act Could Grant Loan Forgiveness on Payroll Expenses

In Washington, D.C., Congress is debating a bill that could increase the ability for businesses to keep their employees, rather than laying them off over fears of lost revenue and other financial concerns that have arisen amid the COVID-19 pandemic.

The CARES Act, (Coronavirus Aid, Relief, and Economic Security Act) was proposed by Senator Mitch McConnel (R-Kentucky) on March 19. It addresses the economic impacts of the coronavirus outbreak by granting emergency loans to distressed companies and industries, including small businesses.

Section 1105 of the bill would allow businesses with fewer than five hundred (500) employees to get loans of up to $10 million through the SBA (Small Business Administration) program, which is typically reserved for natural disasters. These loans could immediately be utilized for mortgages, rental expenses, and—most importantly for workers—payroll for both regular and sick time. If the loan proceeds are used to fund payroll expenses between March 1 to June 30, 2020, the loan can be forgiven.

If the CARES Acts get passed, it would allow many businesses in Louisiana—restaurants, bars, retail shops, gyms—and other professionals such as dentists, doctors, physical therapists, accountants, and attorneys the ability to keep their employees and allow a quicker return to normalcy once the COVID-19 spread stops.

However, if the business chooses the wrong type of loan during the application—i.e., choosing only an SBA disaster loan and not a business interruption loan—that business owner could lose the ability to have a certain portion of their loan forgiven. Thus, it is imperative that each business owner obtains the help of an attorney while navigating the SBA loan application process.

The CARES Act is a contentious bill, however, so it is having some trouble passing. For now, workers and business owners will have to wait while government officials deliberate. We are carefully monitoring the situation and hope that a solution that benefits workers and business owners will come to pass soon. When it does, we will be here to help.

If you are seeking legal counsel during this uncertain time, reach out to LaHatte Law, LLC. Our Louisiana insurance attorneys are continuing to work during this crisis and are happy to take consultations over the phone or via email. Contact us to schedule your free consultation today!

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