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Employer Relief May Be in Sight – Senate Bill Includes Forgivable Loans to Maintain Payroll for Next Four Months

The Senate is currently considering a bill that could greatly increase the ability of employers to retain their employees.  The Coronavirus Aid, Relief, and Economic Security Act or “CARES Act” is currently being considered by the U.S. Senate.  While it has not yet passed and includes a number of provisions, perhaps the most important to companies with fewer than 500 employees is Section 1105.

Section 1105 allows companies with fewer than 500 employees to obtain loans of up to $10 Million from local SBA lenders through the Small Business Administration’s existing 7(a) loan guarantee program.  These loans can be used for rent expenses, mortgage expenses, and payroll expenses (including paid sick leave).  To the extent the loan proceeds are used to fund payroll expenses during the period of March 1, 2020, to June 30, 2020, the loan can be forgiven.  Any reduction in workforce will result in a reduction in the amount of forgiveness of the loan.  All forgiveness is subject to taxation as cancelation of indebtedness income, but since many businesses needing this loan will suffer operating losses during the time period this tax burden is expected to be minimal.

Should the CARES Act pass, this could have a significant impact for employers seeking to retain their workforce and ensure that businesses are able to quickly rebound as the COVID-19 crisis dissipates in the coming weeks and months.  This will also have a significant impact on local lenders as they have yet another tool to assist their customers.

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About this Author

Mike van Someren Real Estate Attorney  Davis Kuelthau Law FIrm
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Mike is a member of the real estate, commercial finance, and corporate practice groups at Davis and Kuelthau. He regularly counsels clients in all aspects of commercial real estate transactions, including providing advice on entity selection and formation, drafting purchase and sale agreements, offers to purchase, performing due diligence, and negotiating and drafting agreements with municipalities and other stakeholders. He has extensive experience counseling clients on land use and zoning matters, such as drafting easements and restrictive covenants, and providing advice regarding...

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Lawrence Glusman Real Estate Attorney Davis Kuelthau
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Larry’s practice focuses on commercial lending, real estate and business transactions. It also includes creditors’ rights in litigation, foreclosure and various insolvency proceedings. For more than 20 years, Larry has represented Milwaukee Economic Development Corporation (MEDC), a trailblazing non-profit lender which invests in the Milwaukee business community. He has documented and closed hundreds of MEDC loans to a wide array of local businesses, helping them achieve their business goals.

Larry also represents established and start-up businesses with real estate and asset purchase transactions and other financing, leasing, development and corporate matters. His commitment to helping small businesses thrive comes from his family’s legacy of owning and operating small businesses. His experience growing up around entrepreneurs and working for a family retail business gave him the tools needed to know how to respond and best serve his clients as an attorney.

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