UPDATED: Information on CARES Act Business Loans and Programs

Posted By Mike Meyer, Thursday, April 9, 2020

stacks of cash

UPDATE from AmSpa Legal Coordinator Patrick O'Brien, JD (4/9/20): The Small Business Administration (SBA) and the Department of the Treasury have released additional guidance on the Paycheck Protection Program (PPP) found in the recently passed CARES Act. You can read the new FAQ here. This FAQ is designed to clear up a number of questions that remain on the process. Here are some of the highlights:

  • In a major clarification, The eight-week loan forgiveness period begins on the date that loan funds are disbursed to the borrower. Banks must disburse loan funds within 10 days of loan approval. This settles some confusion regarding when this window will start and may make it more difficult to delay when it begins.
  • The borrower must apply the SBA's affiliation rules on their ownership to determine their eligibility under this program.
  • Only cash compensation is subject to the $100,000 income limit for employees under the program—this limit does not apply to non-cash benefits the employer also provides.
  • Borrowers may use either the prior 12 months or calendar year 2019 in calculating their payroll costs. Previously, it was not clear if one or the other was allowed.
  • No payments to independent contractors or sole proprietors should be used in calculating payroll costs. Prior guidance hinted that this was the case but left some ambiguity.
  • If you already have applied for a PPP loan prior to the rules being published, you do not need to resubmit your application, but you may revise it based on the new information before it is processed.

With any new program, there are always many details and issues to work out before it operates smoothly. This is especially true of the PPP, given the size of the program and its rapid implementation. There is no doubt that additional guidance or changes may be forthcoming in the future. AmSpa will continue to bring you the most up to date info on these programs during this crisis.

IMPORTANT UPDATE from AmSpa CEO Alex Thiersch (4/2/20): As this process is unfolding, don't expect it to go smoothly and quickly. According to our contacts in the banking sector, banks have been scrambling to figure out how to administer these loans in ways that benefit both the lender and the applicant. As of now, lenders have yet to receive needed program guidance from the Small Business Administration (SBA) and the Department of the Treasury, and the high volume of loan applications that is expected will almost certainly create problems with lender bandwidth. There also are concerns on the lender end of the coordination process being, in their view, too complex to guarantee quick turnaround. Therefore, don't expect that your loan is going to be taken care of right away. This legislation passed less than a week ago, so everyone is still trying to work out the logistics of it.

This should definitely not discourage you from applying for a loan. Obviously, time is of the essence for everyone and, the longer it takes to get a loan, the more precarious a small business's situation becomes. However, everyone involved understands the importance of this program and how badly U.S. small businesses need this influx of money, and the lenders are committed to making it work. Don't panic if you don't get your application in first thing tomorrow (4/3/20)—everyone is dealing the with the issue, including the banks, and it will get sorted out. We are following this story very closely, we are in touch with bankers, attorneys and government officials, and we will have more information as soon as it comes out. Funding is coming, but it's just going to need a little bit of untangling before it gets here.

By Patrick O'Brien, JD, legal coordinator, American Med Spa Association

The Coronavirus Aid, Relief and Economic Security (CARES) Act, which became law last week, has a number of programs intended to provide relief for small businesses. New information about this bill is coming out on a daily basis. On April 1, we conducted a webinar on to give you additional information on the Paycheck Protection Loans. (The webinar recording is available here). This post will provide links to additional resources and information to help you decide which program you should participate in. The U.S. Chamber of Commerce has put together a resource page on the programs, which you can find here. We recommend that you carefully review all information and speak with a trusted advisor to determine the best path for your business. You will want to act quickly and gather your documentation, because April 3 (tomorrow) is the first day to apply for loans.

Paycheck Protection Loan

This is the main relief program of the CARES Act and likely will be the best option for most medical spas. Working with existing U.S. Small Business Administration (SBA) lenders, including many banks—start by contacting your bank to see if it is participating—small businesses and sole proprietors can apply starting April 3, and others will be eligible starting April 10. There are two main components to this program:

  • Receiving a loan to help with payroll and some expenses; and
  • The whole loan is forgivable (i.e. you do not need to pay it back) if you use the funds for certain approved costs within the first eight weeks after origination.

It is important to understand that these are two separate aspects of the program, and there are different requirements for each.

The Loan

The loan amount is 2.5 times your average monthly payroll costs (to a maximum of $10 million) plus any EIDL made after Jan 31, 2020, that you roll into this program.

The average payroll costs are determined using either all of 2019 (most common), January and February of 2020 (for businesses not operational in 2019) or the 12-week period starting February 15 or March 1 to June 30, 2019 (for seasonal employers).

Independent contractors are not included in the calculation. They are able to apply for their own loans under this program.

These loans are at 1.0% interest for two years and require no payments for the first six months (though interest will still accrue).

Compensation over $100,000 is excluded for sole proprietors, independent contractors and the self-employed.


Up to 100% of the loan is forgivable, provided the funds are spent during the first eight weeks after the loan is made on payroll costs, mortgage interest, rent or utilities. No more than 25% of the forgiven amount may be for non-payroll costs; 75% of the forgiven amount must go toward payroll costs.

The forgivable amount can be reduced by the ratio of full-time employees you have during the eight-week period to the average number of employees you had during either February 15 to June 30, 2019, or January 1 to February 29, 2020. For example, if you have eight employees during the eight-week period but had an average of 10 during the other periods, your forgivable amount would be 80% of the loan value.

Also, the forgivable amount can be reduced if your business has a reduction in payroll costs 25% or more below 2019 wages (excluding compensation over $100k for any employee).

If you have already reduced wages or laid off people, your loan forgiveness will not be reduced provided you restore the number of employees and the wage levels by June 30, 2020.

  • Click here for the loan application.
  • Click here for additional information from U.S. Department of the Treasury.
  • Click here for an informational pamphlet from the U.S. Chamber of Commerce.

Employee Retention Tax Credit

The CARES Act introduces a tax credit for employers who have had to, in part or fully, suspend operations due to governmental orders or have experienced a decline in gross receipts of 50% or more, compared to the same quarter the prior year. Eligibility ends when gross receipts return to 80% compared with the same quarter the prior year.

If you received a Paycheck Protection Loan (as described above), you are not eligible for this credit.

This credit is only eligible on wages paid from March 12, 2020, to January 1, 2021.

The tax credit is 50% for the first $10,000 of compensation for each eligible employee. For employers with fewer than 100 employees, all employees count towards eligibility; those with more than 100 employees may only count full-time employees who are paid but not working.

This is a refundable credit that is applied against the employer portion of payroll taxes. The Department of the Treasury is working on a method for employers to receive an advance payment on the credit.

  • Click here for additional information from the Department of the Treasury.
  • Click here for an information pamphlet from the U.S. Chamber of Commerce.

Economic Injury Disaster Loan & Emergency Grant

Those applying for an Economic Injury Disaster Loan (EIDL) due to COVID-19 may request an emergency grant of $10,000. This grant money is issued prior to the loan and does not need to be repaid. To qualify, your business needed to be in existence on January 31, 2020, and have fewer than 500 employees. Independent contractors and sole proprietors also may apply.

An EIDL due to COVID-19 provides loans of up to $2 million in working capital at 3.75% interest for businesses; loans to non-profits have an interest rate of 2.75%. Payments are deferred for one year due to coronavirus.

The grant can be received within three days of submitting the loan application. It does not need to be repaid, and businesses can still receive it even if a loan is not issued. However, you cannot participate in the Paycheck Protection Loan program for the same purpose. If you secure a Paycheck Protection Loan, the $10,000 advance will reduce your total forgiveness amount.

  • Click here for the loan application.
  • Click here for additional information from the SBA.
  • Click here for an information pamphlet from U.S. Chamber of Commerce.

Click here to download the slides that accompany this audio recording.

Click here to download the PPP Fact Sheet from the US Treasury Department.

Click here to download the loan guidance sheet from the US Chamber of Commerce.

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