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Axley attorneys explain CARES Act for small businesses (UPDATE)

President Donald Trump signed a $2.2 trillion rescue package on Friday to help the U.S. economy and health-care system weather the coronavirus pandemic’s toll.

The signing of the CARES Act came not long after its adoption by the U.S. House, rushing the sweeping bill package into law and providing much-needed relief to Americans and their businesses.

The act will allocate $349 billion in loans to small businesses affected by COVID-19. It extends Small Business Administration Section 7(a) loans, the most common SBA loan, to businesses with fewer than 500 employees.

Robert Procter, partner at Axley attorneys in Madison, and Gregory Collins, managing partner at Axley, said their small-business clients have been asking about the specifics of the loans under the act and whether their businesses would qualify for relief, even before the bill was signed into law.

The loans will now be for the period Feb. 15 to June 30. They can be used to pay for the increased medical, family and sick-leave requirements, along with payroll, costs of group health-care benefits, paid sick leave, the payment of mortgage-debt interest, employee salaries, rent, utilities and interest payments on certain existing debt. The firm issued this summary of the two SBA programs under the CARES Act that attorneys said will be most helpful to small business.

“I think it does cover the areas that will provide the most relief because you’re talking about all of the major expenses for small businesses,” Procter said.

Collins said because of the increased availability and demand for the loans, a bottleneck could occur. He said the federal government is increasing the number of lenders as one way to help small businesses access the $349 billion in funding.

“The question is: Who are those lenders?” Collins said. “(We need) to get that information out into the marketplace, so these small businesses are able to identify a lender and start the process.”

Procter said he’s been directing his clients, many of whom already have SBA loans, to work directly with their current lenders. Businesses can also apply through the SBA website. He recommends businesses start looking at loans immediately with their financial consultant, attorney and banker.

“There’s going to be a process, and the process is going to take a little bit of time,” Procter said. “They need to start planning now and projecting where they’re going to in the next few weeks and months and for the rest of the year.”

To further speed up the process, loans under the act are uncollateralized. Lenders aren’t having to evaluate collateral, get appraisals and decide if there’s a sufficient loan-to-value, Collins said. He predicted loans under the act will be given out much quicker than SBA loans have historically.

Both he and Procter have clients who have applied for SBA Economic Injury Disaster Loan assistance loans, which were expanded to cover COVID-19 on March 12, but none of the businesses had received the loan by Friday morning.

“Previously there was an economic disaster program in effect, and there has been a high demand for that,” Procter said. “That process has worked pretty well.”

Procter and Collins both have clients who have applied for those Economic Injury Disaster Loan assistance loans, but those businesses also hadn’t received a loan as of Friday morning.

Collins said at this point in the pandemic, it’s hard to decide if the relief in the act is enough for small businesses.

“Until we plateau on the cases and there is some clear direction in terms of permission to go back to work, I don’t think we can answer that question,” Collins said.

Procter said at the very least, the act is lowering some of the anxiety business owners and employees have about the pandemic’s impact on their work.

“There is a feeling with the clients I work with that there is some sense that people are going to get through the near term,” Procter said. “How it will apply to the economy for six to 12 months is really difficult to tell, but I think it will have an effect on both small business owners and their employees that there’s some safety net there.”


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