If your startup is struggling in the midst of the COVID-19 pandemic, you are not alone. Many startups and small businesses have been hit hard due to the deadly Coronavirus. In an effort to help support businesses, employees, and your average American, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). If you own a startup in or around Los Angeles and are concerned during this difficult period, you may be able to obtain financial assistance from specific programs created by the CARES Act.
Overview of the CARES Act
This was a historic piece of legislation and the largest injection of economic stimulus/support by the federal government in American history ($2.2 trillion). The CARES Act includes various provisions designed to provide relief to small business owners across the country.
Paycheck Protection Program
One of the central provisions in the CARES Act is the Paycheck Protection Program. Congress allocated $350 billion to fund this program, which will in turn provide loans to eligible businesses. Each loan issued through this program is supposed to be used to help cover an eligible borrower’s payroll, mortgage interest, rent and related expenses for up to eight weeks from the date the loan originated. Furthermore, if you use the loan for qualifying expenses while maintaining your team of employees, it is possible to have some or all of the loan amount forgiven.
So, in effect, you may be eligible to secure a low interest loan and not have to worry about being burdened with massive debt payments since the balance of the loan could be forgiven if the funds are used to help cover your payroll.
Are Startups Eligible for the Paycheck Protection Program?
Most likely yes. The program is available to businesses who meet the following criterion:
- Adversely impacted by the Coronavirus outbreak;
- Have 500 or less employees (including employees of affiliates);
- Operational as of February 15, 2020; and
- Have employees or paid contractors on payroll
In addition, nonprofits, sole proprietors, self-employed individuals and independent contractors may also be eligible for the Paycheck Protection Program.
Documents Needed to Apply for the Paycheck Protection Program and to Have the Loan Forgiven
It is important to understand that the Paycheck Protection Program is brand new, as is the underlying CARES Act. The specific regulations and details concerning the implementation of the program are being worked on, and modified, as of the date of this posting. Hence, it makes sense to speak to an experienced startup attorney in Los Angeles before applying for a loan through the Paycheck Protection Program. It is also extremely important to maintain detailed financial records, including:
- Documentation detailing the number of full time employees on payroll with your startup (including payroll tax filings, state income, payroll, and unemployment insurance filings, etc.).
- Records that reflect payments made on your mortgage, lease, and/or utility payments.
- Any other financial document requested by the Small Business Administration (the agency in charge of administering the Paycheck Protection Program).
Speak to an Experienced Startup Attorney in Los Angeles Today
If you are encountering challenges keeping your startup/business afloat during this difficult period in history, we understand and are here to help. If you have questions about your eligibility for financial assistance through the CARES Act, contact the highly reputable Hakim Law Group today at (310) 993-2203. Our law firm is comprised of professional, trusted and experienced business attorneys in Los Angeles who can help you get your business on the right track. www.HakimLawGroup.com
