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The CARES Act: What Members Need to Know

The Coronavirus Aid, Relief and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers on the payroll during the pandemic or to restore their payrolls afterward. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses.

To help AHFA members understand the details and possibly prepare to file for a loan, Chris Andresen, senior vice president at Dutko GR, provided AHFA with essential details on this program.   

Requirements for Small Business Loans

To be eligible for a small business loan under CARES, the borrower must have been in operation prior to February 15, 2020, and have had employees for whom they paid salaries and payroll taxes. Independent contractors such as sales representatives are included. 

(Updated April 1, 2020)
Most reports on CARES loan eligibility define “small business” simply as one with fewer than 500 employees or less than $500 million in annual sales.  But the U.S. Small Business Administration (SBA) has established small business size standards matched to specific industries. The SBA table listing all industries by their North American Industry Classification System (NAICS) number was last updated in August 2019. 

For the household furnishings industry, those size standards are found on page 20 of the list and include the following as “small businesses” for purposes of federal assistance: 

  • Upholstered household furniture manufacturers with 1,000 or fewer employees
  • Wood household furniture manufacturers with 750 or fewer employees
  • Metal household furniture makers with 750 or fewer employees
  • Household furniture makers “other than wood or metal” with 750 or fewer employees
  • Mattress manufacturers with 1,000 or fewer employees

Loans can be up to 2.5 times the borrower’s average monthly payroll costs, not to exceed $10 million.

The borrower is eligible for loan forgiveness equal to the amount spent on any of the following:

  1. Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  2. Employee salaries commissions or similar compensations
  3. Interest on any mortgage obligation (but not any prepayment of or payment of principal on a mortgage obligation)
  4. Rent (including rent under a lease agreement)
  5. Utilities

The loan can be used to pay for interest on any other debt obligations that were incurred before the covered period.

Loans have a maximum maturity of 10 years from the date the borrower applies for the loan. During the covered period, the interest rate on the loan cannot exceed 4 percent.

Although it does not include industry-specific definitions, the U.S. Chamber of Commerce has provided a useful small business guide and checklist on CARES emergency loans.

Additional details on the Paycheck Protection Program, including a loan application for borrowers, is available from this recently updated page on the U.S. Treasury Department’s website. Andresen says another update from Treasury is expected tomorrow, April 1.