Money Matters Brief: What is the Coronavirus Relief Package?

Maybe Fridays should be known as “Stimulus Day.”

That’s because, as a follow-up to the CARES Act, which was also signed into law on a Friday (March 27^th), President Trump signed the latest $484 billion coronavirus relief package into law on Friday, April 24^th.

Unlike the CARES Act, which had a long list of benefactors, most of the money from this bill will be going directly to the Paycheck Protection Program (PPP), with the goal to help enable small businesses retain employees.

So far, the total amount of emergency funding since the onset of the nearly full economic stop caused by the pandemic has totaled about $2.8 trillion. But with the economy still reeling from the effects of COVID-19, this almost certainly won’t be the last time the government sends cash and aid back out into the system. In fact, it’s no secret that Congress is already working on additional stimulus packages, although precisely when further legislation will be unveiled is uncertain.

Coronavirus Relief Package: What exactly is in it and what does it do?

It infuses $310 billion into the Paycheck Protection Program.

The Paycheck Protection Program (which recently ran out of funds) is a Small Business Administration (SBA) loan program created to encourage businesses with fewer than 500 employees to hang on to workers rather than laying off or furloughing them.

According to the SBA website, these loans will be entirely forgiven if all employees are kept on for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. (Small business owners can apply for loans through any participating federally insured depository, credit union, or Farm Credit System institution.)

The CARES Act initially allocated $349 billion for the Paycheck Protection Program but was heavily criticized for both technical issues with the SBA’s processing system, and because some large restaurant chains and universities with sizeable endowments were able to quickly procure loans. 

It makes $60 billion available to credit unions and small banks for business loans.

Because many small businesses receive funding and loans from local banks and credit unions, and in light of the fact that much of the first round of stimulus money ended up in the hands of larger companies, this is viewed as a positive step that should get more money in the hands of local or regional employers.

Additionally, $30 billion has been earmarked specifically for community-based lenders, which would include Community Development Financial Institutions (private financial institutions whose mission is to make affordable lending that assists businesses in low income communities), and Minority Depository Institutions, which are federally insured banks and savings and loans where at least 51% of the voting stock is held by minority individuals.

Unfortunately, not every business that needs money will receive it.

Business owners and financial officers are encouraged to move quickly and to pursue loans through banks where they have an existing relationship.

Just how much money could a small business receive?

Businesses with up to 500 employees could receive forgivable loans equal to 2.5 times the amount of their monthly payroll expenses, up to $10 million. But they must use 75% of the loan specifically for payroll and there are some exceptions.

What other entities besides small businesses will be receiving money from the new bill?

While the new stimulus bill does not set aside funds specifically for individuals, it does include $75 billion for hospitals and healthcare providers to cover coronavirus-related expenses, and an additional $25 billion has been earmarked exclusively for the expansion of COVID-19 testing.

Regarding the economic fallout from the coronavirus, what’s next?       

Lawmakers and the president are already planning additional steps to counter the economic devastation wrought by the pandemic. While all options remain on the table, some candidates and possibilities for future fiscal relief in the next round of stimulus include individuals and state and local governments, as well as payroll tax cuts for the entertainment, sports, and restaurant sectors.

If you have any questions related to investing, retirement planning, Social Security, the CARES Act, or the latest coronavirus stimulus bill, please contact us and we can assist you via phone or easy-to-use video conferencing.