Paycheck Protection Program of the CARES Act aims to help small businesses help their employees

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Recently, Congress passed a $2 trillion legislative package aimed at helping individuals, businesses and the health care system as the entire nation grapples with the global COVID-19 pandemic. Signed into law on March 27, the Coronavirus Aid, Relief and Economic Security Act, the CARES Act, also can help keep workers on payroll to avoid them losing wages or benefits.

Of the various targeted groups or systems within the umbrella of the overall legislation, a portion of it provides incentives for small businesses — as well as nonprofits ― to keep employees employed during the public health crisis. Dubbed the Paycheck Protection Program, its $350 billion allotment can provide forgivable loans to businesses of up to 500 employees that keep those workers employed between now and June.

“It’s really quite extraordinary,” said Steven Blaine, a founding director of Virginia National Bank who also works with the law firm Woods Rodgers.

Blaine said he has a number of clients who have been “on edge” amidst the economic impact of the coronavirus.

While the applications are open and being processed, Blaine said that banks are still drafting regulations as they go and it could take a few weeks for small business owners to see the money. Although the idea became law, the details have to be implemented through the banking industry, which is highly regulated.

“[Congress] couldn’t possibly have thought of all the what ifs,” Blaine said. “So the Small Business Association, the Department of Treasury and the bankers’ association are writing rules on the fly.”

Blaine said that everyone involved is working diligently to ensure swift disbursement of funds to companies and the employees in need.

“We are going ahead and taking the applications before we have all the details of the program ironed out, but the effort is to get the money out as fast as we can,” Blaine said. “People are going ahead and banking on faith that we are going to be able to get it out.”

Local small-business owner Seth Herman owns High Tor Gear Exchange with his wife, Erin James. After funding a round of payroll with their own money, they laid off their staff of five. Now through their application for the program, they aim to keep their staff and landlords at McIntire Plaza paid. Herman said that their bank, UVa Credit Union, was helpful in navigating the application.

“There’s a lot of uncertainty around all of the specifics in the program,” Herman said. “Having that point of contact at the credit union to help us walk through it was amazing.”

In the meantime, banks are processing new guidelines for the loans — like the exemption of needing a particular credit history to qualify.

“Usually, with loans, you have to have a credit history of good credit. Here, the loans have no regard to credit,” Blaine said. If you have the employees and you are a small business, you can get the loan.”

Once a small business receives their loan, the money is meant to be directed towards payroll to their employees; continued health care benefits; payments on mortgages or leases related to the business; and any utilities, transportation, telephone or internet access related to the business.

Additionally, any small business that has already laid off employees due to COVID-19 can use this loan to hire them back.

While the loans have the ability to be completely forgiven, like a grant, there are chances that some small-business owners could have to repay portions of it should they not be able to retain all of their employees during the next eight weeks.

“If you had to lay off anyone then you would pay back the loan based on the ratio you let go,” Blaine explained. “If you had 10 employees, and you had to lay off one, then you’d have 90% of the loan forgiven.”

He said that the objective is to help companies be able to retain their employees on the payroll. Blaine also noted the addition of qualification for nonprofits as “huge,” because traditionally nonprofit organizations would not have access to SBA funding or programs.

While the $350 billion dedicated towards the payroll protection program is a large sticker price, it comes at an unprecedented time during a public health crisis across Virginia and the nation. In the event that it gets tapped out, Blaine said he suspects the Department of Treasury could bolster the program’s coffers.

“We can’t predict what will happen but there is a belief of ‘let’s see how it works,’” Blaine said. “Whether that requires congress to approve it or not, I think there’s a way the Treasury could pump more funds into it without Congress.”

The loans can be up to 2½ times the average monthly payroll for each business and are capped at $10 million so as many loans as possible can be disbursed to businesses in need.

While the program is not a total cure for all economic hardship during COVID-19, Blaine is optimistic about the program and what it means for the many small businesses and nonprofits in Charlottesville.

“If you think of it in a happy way — if we can get $350 billion out into small businesses, that is going to help so many small businesses,” he said.

Outside of PPP, another part of Congress’ CARE Act includes Emergency Economic Injury Disaster Loan grants. With a total of $10 billion allocated for these grants, which expire on Dec. 31, businesses can request a $10,000 advance on their business’ pending disaster loan application.

“They are treating this as a natural disaster, so small businesses can apply for loans without regard to their payroll,” Blaine said.

Herman said that High Tor Gear Exchange has also applied for EEIDL.

As essential employees work to keep their businesses up and running, provide goods and services, or serve on the frontlines to treat COVID-19 or as first responders, Blaine notes those behind the scenes who help with the work that they can do.

“It’s been remarkable to see the response,” Blaine said. “You have people working in banks or from home and they’re not as courageous as our first responders, but they are responding too.”

The application for the program can be found here.