FORGIVABLE LOANSTHROUGH THEFEDERAL CARES ACTFOR SMALLBUSINESSESINCLUDING CHILDCARE PROVIDERS

C H I L D C A R E S E R V I C E S

A S S O C I A T I O N

Two loan programs areavailable for small businessesthrough the Coronavirus Aid,Relief and Economic Security(CARES) Act that can offersome assistance to child careproviders (family child carehomes and centers). Both ofthese programs are operatedby the Small BusinessAdministration (SBA).

when determining the loanforgiveness amount. Employers must keep goodrecords to verify that staff andwages were maintained, and todocument payroll and otherexpenses (e.g. utilities,mortgage interest or rent).These records must besubmitted.

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KEY INFORMATION

Paycheck ProtectionProgram (PPP)Emergency Economic InjuryDisaster Loan Program(EIDL) (for loans plusemergency cash advances)

Funds are available on a firstcome, first serve basis to allsmall businesses. While manyprograms may be eligible, notall programs will receive funds,because the funds will run out. The two programs are:

If a business uses bothprograms, the business cannotcharge the same expenses forthe same time period to bothprograms. Also, the advanceamount will be considered

PROGRAM ELIGIBILTY

501(c)(3) non-profitorganizations with fewerthan 500 employeesSmall businesses with fewerthan 500 employeesSelf-employed individuals(with submission of certaindocumentation)Sole proprietorsIndependent contractorsTribal business concernsthat meet the SBA sizestandardCertain religious institutionsare eligible for the PPPloan, but only to cover thepayroll costs of anassociated business like athrift store or a child carecenter

(for both programs)

PAYCHECK PROTECTION PROGRAM(PPP) SPECIFICSThe Paycheck Protection Program (PPP) is designed to cover eight weeks of payroll-related expenses to support smallbusinesses so they can keep employees working rather than laying them off. It is a loan that can be converted to a grant.Employers apply for PPP at participating banks and credit unions.

AMOUNT THAT CAN BEBORROWED AND FOR WHATEXPENSES

Eight weeks of payroll, for hourly and salariedemployees, under the maximum $100,000thresholdEmployee group health care benefits,including insurance premiums, retirementcontributions and paid sick or medical leaveRent or mortgage interest paymentsUtilitiesUp to 25% of the PPP can be used for non-payroll related expensesThe eight-week period can apply to any timeframe between February 15 and June 30,2020

Eligible programs can borrow up to 2.5 timestheir average monthly payroll expense. Theamount is intended to help cover:

REPAYMENT OF A PPP LOAN

Employers that meet all the requirements of PPPloan will have the loan turned into a grant andthe loan will be forgiven. However, if some of thefunds are spent on other business-relatedexpenses such as supplies, that portion willremain as a loan and must be paid back. Anyamount to be paid back will become a 2-yearloan at a 1% interest rate. A borrower will workwith their lender (the bank from which the loanwas made), to verify covered expenses and theamount to be forgiven. This process will occur atthe end of the eight-week loan period.

HOW LAYOFFS ARE FACTOREDINTO THE PPP

If after receiving a PPP loan, an employer laysoff employees, then a portion of the funds(based on a formula related to the number laidoff) will be identified as a loan and repaymentwill be necessary. If the employer lays off employees as a result ofCOVID-19 related hardships BEFORE applyingfor the loan, and if the employer can rehire allemployees by April 26, 2020, they can still beeligible for loan forgiveness. If employees arenot rehired, the loan forgiveness will be reduced.

WHAT IS NEEDED (AND NOTNEEDED) TO APPLY FOR A PPPLOAN

The completed application: Payroll ProtectionProgram application2019 IRS forms (tax return or 990) or 2018forms, plus year-end income, expense andasset statementsAn applicant does not need to pledge anycollateral and does not need to personallyguarantee the loanThere are no fees to apply for a PPP loanProviders apply at participating banks andcredit unions

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EMERGENCYECONOMIC INJURYDISASTER LOANS(EIDL) SPECIFICS

The Emergency Economic Injury Disaster Loan (EIDL) serves asa loan program to provide working capital to small business during orafter a disaster, until normal operations can continue. Loans can bemade up to $2 million. With the CARES Act, an eligible applicant canreceive an emergency advance of up to $10,000 to meet urgentbusiness obligations, while waiting for their EIDL to be processed.The forgivable cash payment advance will be issued within threedays of applying. The $10,000 cash advance does not need to berepaid if the larger EIDL is not approved.

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HOW TO APPLY FORAN EIDL

PROGRAM ELIGIBILITY – BOTH PROGRAMS

Eligibility is the same for both programs. See page 1.

ELIGIBLE EXPENSES –EIDL

Paid sick leave foremployees unable to workdue to the direct effect ofCOVID-19Payroll costs in order toretain employees duringbusiness disruptions orsubstantial slowdownsIncreased costs related topurchasing materials thatare unavailable from theapplicant’s original sourcebecause of shortages in thesupply chainRent or mortgage paymentsRepayment of obligationsthat cannot be met due tolosses in revenue

REPAYMENT OF THEEIDL LOAN

An applicant is not required torepay any amounts of theemergency advance underEIDL, even if they are denied alarger loan (that they appliedfor when completing the EIDLapplication). The loan has a

3.7% interest rate andpayments can be deferred for ayear. The CARES act waivescertain loan eligibilityrequirements.

Providers apply directly to theSBA for EIDL loans with thisapplication. The amount of the loan can beup to $2 million with anemergency advance of up to$10,000. Applicants must self-certifytheir eligibility. Certain rulesrelated to personal guarantees,length of operation and inabilityto get credit elsewhere havebeen waived in the CARESAct.

UNEMPLOYMENTCOMPENSATION

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Self-employed individuals and others not traditionally eligible forbenefits;An additional $600 a week in unemployment benefits; andAn additional 13 weeks of benefits.

The CARES Act includes new, additional supports to individuals whohave been laid off due to the impact of COVID-19. These expanded federal unemployment benefits include funds for:

Because each state operates its unemployment compensationprogram, each must enter into agreement with the U.S. Departmentof Labor. This agreement allows the state to administer the benefits,and pay for the federal portion available through the CARES Act. Asof April 8, 2020, North Carolina’s Department of Commerce,Employment Security Division was awaiting further guidance from thefederal Department of Labor. Once that guidance has been received,the website reports that it will take about two weeks for benefits tobegin to be paid. Currently, without the CARES Act benefits being available, themaximum unemployment benefit amount in North Carolina is $350 aweek for 12 weeks (actual payments will vary). Keep in mind thatthere is always a 10 day waiting period before benefits start (soemployers can respond to claim requests). To file for unemployment in North Carolina, go online to theapplication here. Or call the DES Customer Call Center at 1-888-737-0259. There may be a long wait time due to the number of calls madeto the call center.

The Employment Security Division has a list of frequently askedquestions and information related to COVID-19 here.

FOR MORE INFORMATION

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SBA Paycheck Protection Program application

SBA Economic Injury Disaster Loan (EIDL) application

Contact the Small Business Development Centers locatedin North Carolina

Contact the Women’s Business Centers in North Carolina

SOURCESBipartisan Policy Center. U.S. Small Business Administration Support- the Coronavirus Aid, Relief, and Economic Security Act-March 26, 2020. https://bipartisanpolicy.org/wp-content/uploads/2020/03/SBA-Assistance-CARES-Act-March-26-2020-BPC-and-CED.pdf

Center for Law and Social Policy. Fact Sheet: Forgivable Loans for Child Care Providers through the CARES Act by R. Ullrich April3, 2020. https://www.clasp.org/sites/default/files/publications/2020/04/SBA%20Loans%20for%20CC%20Providers_0.pdf

First Five Years Fund. Child Care and COVID-19 Economic Relief. https://www.ffyf.org/relief-for-child-care-providers-included-in-the-cares-act/ Last accessed 4/7/2020.

First Five years Fund. Small business Administration Loans Immediately Available to Child Care Providers. https://www.ffyf.org/small-business-administration-sba-loans-immediately-available-to-child-care-providers/ Last accessed4/7/2020.

Virginia Early Childhood Foundation. A Guide for Virginia Child Care Providers to Navigate the COVID-19 Crisis.https://www.vecf.org/wp-content/uploads/2020/04/Child_Care_Guide.pdf Last accessed 4/7/2020.

THANK YOU TO OUR CHILD CARE WORKFORCE FOR YOUR INCREDIBLE DEDICATION ANDPASSION DURING THE TIME OF COVID-19. WE WISH YOU ALL SAFETY AND GOOD HEALTH.

C H I L D C A R E S E R V I C E S

A S S O C I A T I O N

NC Early Education Coalition

NC Child

The North Carolina Justice Center

The North Carolina Division of Human Health and ServicesCOVID-19 Businesses and Employers Updates