Editor's Note, Friday, April 3, 2020: Today is the first day companies can apply for a loan through the CARES Act, passed a week ago by Congress and signed into law by the president.
The $350 billion set aside for small business loans allows firms with fewer than 500 employees to apply for the loans through private banks, guaranteed by the Small Business Administration. Loans are intended to help employers retain staff during the COVID-19 pandemic. The Payment Protection Program, as it is called, means that an emergency loan can be forgiven if companies maintain their payroll, or partially forgiven if companies reduce payroll by a certain percent. If companies temporarily reduce staff, but rehire at the same payroll levels by the end of June, loans are also eligible for forgiveness. Up to 25 percent of the loan can be used for other operational costs, such as rent and utilities. Experts recommend opening a separate account to receive and expend the loan, for easier documentation of expenses when the time comes to apply for debt forgiveness.
Independent contractors and sole practitioners are also eligible under the loan program, but will not be able to apply until April 10.
The coronavirus pandemic has upended nearly every aspect of normal life across the globe, and the architecture and design professions are no exception. According to a new report from the AIA, two thirds of firms have seen prospective projects slow or stop, and more than three-quarters have already faced problems with current projects due to the outbreak. The practices surveyed also reported that they expect to see revenues fall by 10 percent in March, then 15 percent in April. Staff in nearly half of all offices that responded to AIA are already working remotely—a fact that can bring its own set of challenges.
On the afternoon of Friday, March 27, the U.S. House of Representatives passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act—a $2 trillion rescue package, which the Senate unanimously passed on March 25. President Donald Trump signed it into law shortly thereafter. The bill is the third federal law passed in response to the current pandemic (two others were passed on March 6 and March 18), and the largest government financial package ever by far, with implications for individuals, small and large businesses, hospitals and public health agencies, state and local governments, education, and the federal safety net.
“Workers and employers need immediate relief, and we’re grateful that Congress acted swiftly to approve bipartisan legislation to aid businesses of all sizes,” 2020 AIA President Jane Frederick, FAIA, said in a statement.
Among the most notable components of the bill are the one-time cash payments that some people—all those earning up to $99,000—can expect to receive. Individuals who make up to $75,000 annually will receive $1,200, plus $500 for each child in their household. (Higher earners, up to the $99,000 cutoff, will receive smaller checks.)
An explainer from the AIA (PDF) breaks down the ways this legislation will have an impact on the architectural profession. Here are some highlights:
The CARES Act boosts unemployment assistance through the Pandemic Unemployment Assistance program, which increases benefits to those unable to work due to the pandemic by $600 per week for four months. It also widens the scope of who is eligible to receive those benefits by including self-employed people, freelancers, and contractors.
The bill authorizes $349 billion (to be spent through the end of 2020) for a Paycheck Protection Program, offering loans of up to $10 million to sole-proprietors and small businesses (1 to 500 employees) to cover salaries, paid sick leave, insurance, and mortgage, rent, and utilities. Funds used within 8 weeks of receiving the loan may be converted to a grant, “to encourage businesses to retain their employees,” notes the AIA.
Mid-sized businesses (500 to 10,000 employees) may be eligible for loans with zero interest for the first 6 months (then 2 percent interest annually), provided that funds are used to retain 90 percent of their employees at full salary/benefits, through September 30.
And businesses of all sizes—including self-employed people—can defer paying social security tax to the federal government until the end of 2021. Also, businesses that were fully or partially closed due to a shut-down order, or that experienced a 50 percent or greater decline in gross receipts, can expect a payroll tax credit representing 50 percent of wages they paid to employees during the pandemic.
Read more about the bill in this summary from the AIA.