How Business Owners & Independent Contractors Benefit from the CARES Act

Here’s how the Coronavirus Aid, Relief, and Economic Security (CARES) Act benefits business owners and independent contractors:

“Paycheck Protection Program” (PPP) Loans Up to 2.5 times Your Monthly Payroll
Businesses can apply for a loan that’s 2.5 times your monthly payroll. “Payroll” includes:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  • State and local taxes assessed on compensation; and,
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee. This means that real estate agents and other independent contractors can qualify for this loan as well.

The loan will be forgiven if you use the funds for payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan. However, you will owe money if you do not maintain your staff and payroll:

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

Deferred Interest and Payments
All payments for “PPP loans” are deferred for 6 months; however, interest will continue to accrue over this period at an annualized rate of 1%. On any portion of the loan that is not forgiven, payments will start after six months and the loan will need to be repaid over a 2-year time period.

Other Relief

  • If you currently have an SBA loan, the SBA will make your principal and interest payments for up to 6 months
  • If your business has been negatively impacted by the coronavirus, you can also apply directly with the SBA for an “Economic Injury Disaster Loan”

More details on all these items can be found here:

About the author

ALG Mortgage was founded by a team of local entrepreneurs with deep roots in the mortgage, real estate, banking, public accounting, and digital marketing industries. As an expert independent mortgage agency, we are not tied to any one lender in the industry, allowing us to truly act as partners for the clients we serve, and ensure they end up in the absolute best option for their own personal situation.

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