Payroll Protection Program: CARES Act

[Matt McMacken]

So I’m a Controller for a small construction firm (>25M) in New York. All construction is limited to essential construction only which effectively put an entire stop on our operations.

With the passage of the CARES Act and the payroll protection program, the federal government is setting aside funds for the Small Business Administration for banks to loan up to 2.5 times your average payroll for the trailing 12 months. Unsecured, no collateral. 10 years. Max 4%.

Then for 8 weeks immediately after closing on said loan, a business will be “forgiven” for cost of payroll, rents, utilities, and interest on loan obligations during that time period. In addition, the amount “forgiven” will not be considered income for tax purposes.

Our organization is well over a million in forgivable cost if we apply. 98% are already on unemployment. Are we making money, readily available now to make things worse tomorrow?

-The housing bust in 2008... tons of bad mortgage loans that went upside down.

-Corona Virus 2020.... a flooded amount of mid size loans that were just forgiven?

I have to believe there will be some major consequences in the very foreseeable future. What happens if this pandemic last more than four months... I fear this is what makes a recession a depression...

I’m just a number cruncher, so what do I know lol. Would love to hear from anyone who find this stuff interested. Hopefully I’m wrong...