• Jason Godwin

Refueling the CAREs Act

On Tuesday April 21st, Lawmakers scramble to answer the distress call of small business owners across the country as the economic shut down ravages the economy nation wide. Senate Lawmakers pass the Additional $480 Billion in funding for the CAREs Act after Chuck Schumer , Nancy Pelosi, White House chief of staff Mark Meadows and Treasury Secretary Steve Mnuchin negotiated over the phone "well past midnight" Monday and "came to an agreement on just about every issue." The Additional round of finding will inject $480B into the CAREs act in an effort to relive the US economy from the effects of Covid-19.

The initial stage of the CAREs act injected $342B into SBA guided programs to empower banks nation wide with the liquidity to help capitalize struggling small businesses. The $343 Billion in relief was capitalized through the Pay Check Protection Program designed to offer Small businesses and non profits with less than 500 employees a forgivable loan to supplement payroll and revenue loss due to Covid-19. Here are the PPP highlights.

· SBA 7(a) loan

· Apply with any SBA lenders. Banks on offering loans to current customers first.

· Maximum loan amount-2.5X average payroll cost capped @ $100K/employee, Maximum of $10M Per borrower.

· Businesses with <500 employees, businesses in NAICS 72 w/ <500 employees per location.

· Used for, Payroll,

· Interest on mortgages, rent, utilities, interest on any debt incurred prior to 2/15/2020

· Collateral requirements are waived.

· Personal Guarantee is waived.

· Forgivable-Up to 100% forgivable is stipulations met. Click HERE for more details on the PPP.

· Interest-up to 5% for non-forgiven, currently fixed at .5%

· Up to 10% for non-forgiven portion, Currently 2 years.

· No pre-payment penalty

Here are the Bullet points for the Senate approved Re-funding of the CAREs Act.

$480 Billion Senate approved package.

· Approved 4/21/20

· Schumer, Pelosi, White House chief of staff Meadows and Treasury Secretary Mnuchin negotiated well past midnight Monday and "came to an agreement on just about every issue."

· $380B for small businesses-$321B to PPP, $60B of which for small lenders with <$10B in assets (community banks & credit unions). $10B in EIDL grants. $50B for EIDL loans, $2.1B for SBA administration.

· $75B for hospitals

· $25B for testing-"necessary expenses to research, develop, validate, manufacture, purchase, administer and expand capacity for COVID-19 tests." Of the total amount dedicated to testing, there will be $11 billion given to states and localities "to develop, purchase, administer, process and analyze COVID-19 tests." The rest of the money will be given to other entities, including federal agencies, to invest in promising new technologies and to distribute to labs.

Here are some of my figures.

· First PPP funding was $342B, which went to 1.66M individual loans.

· $30.7M small businesses in American, 5.4% were able to access loans. Small business makes up 1.5M new jobs annually, and 64% of new jobs a year.

· Current US GDP $20.5T, The Cares act funded 10% of GDP or $2.2T.

· Small business makes up 44% of GDP, or $9.03T

· PPP was 10% of GDP. 8.33% per month of yearly GDP, or $1.69T/month needed to make target GDP/year.

· GDP/Capita is $65,456, Current unemployment is 10% or 26M jobs.

It’s hard to put a figure to it as data for total loss of GDP is difficult to nail down as well as what percentage of the economy is still operating at normal capacity. Just using unemployment figures and small business contribution to yearly GDP, it seems congress is going to have to come up with a total of $141B in unemployment benefits/Month of shut down and/or $1.18T in SBA funding/Month of shut down assuming current GDP @ 30% of norm. 1st quarter 2020 GDP estimates by Bureau of Economic Analysis comes out April 29th 08:30 AM. I will revisit me Estimates them. Their Schedule is HERE.

#COVID19 #covid-19 #coronavirus #SBA #PPP #EIDL #CAREsact

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