Macatawa Bank is participating in the CARES Act and has prepared the following guide to help small businesses and self-employed individuals prepare to file for a loan. We expect the SBA to release additional details later this week, but here is what we know today.
Please contact your Macatawa Bank Relationship Manager directly, or call (877) 820-2265 to get connected.
What is the CARES Act?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocates $350 billion to create a Paycheck Protection Program to help keep small businesses running during the COVID-19 pandemic and related economic crisis. The Act, through the Paycheck Protection Program, provides 100% guaranteed loans and loan forgiveness to cover specific operating costs for small businesses.
Loan forgiveness is available to borrowers who maintain their payrolls during the pandemic crisis, or restore their payrolls within a certain period of time after receiving loan proceeds.
The Small Business Administration (SBA) will be providing more details soon and we will share those as they become available. In the meantime, we are happy to share these guidelines to help you prepare to discuss your loan term and structure with your Macatawa Bank Relationship Manager.
Who is eligible?
- Businesses with fewer than 500 full or part-time employees
- For hospitality and restaurant businesses in the accommodation and food services section under the North American Industry Classifications System (NAICS 72), the employee limit is applied on a per location basis.
- Businesses operating as sole proprietorships, independent contractors and self-employed individuals (subject to additional documentation requirements)
- Certain non-profits including 501(c)(3) organizations and 501(c)(19) veterans organizations, and tribal business concerns with fewer than 500 employees
- The Act waives the SBA’s regulations on entity affiliations for Businesses operating as a franchise or who receive financial assistance from approved Small Business Investment Company
- Physician practices are eligible, regardless of organizational structure
What criteria must be met?
A business is eligible if the borrower was in operation before February 15, 2020 and had paid employees and payroll taxes, or paid independent contractors. We will also ask for a good faith certification that:
- The loan request is necessary to support ongoing operations due to the economic uncertainty related to the pandemic.
- Loan funds will be used to retain employees and maintain payroll, or make mortgage/lease and utility payments.
- Borrower has no pending loans that duplicate the purpose and amounts applied for with this program.
- The borrower has not received a loan, from Feb 15, 2020 to Dec 31, 2020, that duplicates the purpose and amounts applied for with this program. (Note: There is an opportunity to fold emergency loans made between Jan 31, 2020 and the date this loan program became available into a new loan under this act).
For independent contractors, sole proprietors or self-employed individuals, Macatawa Bank will be looking for certain documents, such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship. Final underwriting requirements will be determined by the SBA.
How much can I borrow?
Loans can be made up to 2.5 times your average monthly payroll costs, not to exceed $10 million.
Non SEASONAL EMPLOYERS:
Maximum loan =
2.5 x Average total monthly payroll costs incurred during the year prior to the loan date
For businesses not operational in 2019:
2.5 x Average total monthly payroll costs incurred for January and February 2020
Maximum loan =
2.5 x Average total monthly payments for payroll costs for the 12-week period beginning February 15, 2019 or March 1, 2019 (decided by the loan recipient) and ending June 30, 2019
Will this loan be forgiven?
Borrowers are eligible for loan forgiveness.
A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the loan origination date:
- Payroll costs (using the same definition of payroll costs as used to determine loan eligibility)
- Mortgage interest incurred during the ordinary course of business
- Rent paid on a lease agreement
- Utility payments (gas, electric, water, telephone, internet)
- Additional wages paid to employees who receive tips
The loan forgiveness cannot exceed principal. Payroll costs for compensation above $100,000 in wages are not eligible for loan forgiveness.
Are there risks of reduction in forgiveness?
The calculated loan forgiveness total above would be reduced if there is a reduction in the number employees or a reduction of greater than 25% in wages paid to employees.
What if employees are brought back or wages are restored?
Reductions in employment or wages that occur during the period beginning on Feb 15, 2020 and ending 30 days after enactment of the CARES Act, shall not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.
Covered loans that are not forgiven will have a maximum maturity of ten years from the date the borrower applies for the loan forgiveness.
Thank you for the trust you’ve placed in us.
It is our pleasure to serve you and we are here to help. For the latest information on how we are aligning our resources to help customers during the COVID-19 pandemic, please visit MacatawaBank.com/Corona
. Watch for more information and additional guidance from the SBA soon.