The effects of COVID-19 have been devastating on the U.S. economy. The government announced a massive relief package for businesses, non-profits and employees to ensure the economic fallout is contained. In this blog, we review some of the details of the Coronavirus stimulus plan.
The Necessity of the Lockdown and Stimulus Program
Currently, more than half a million people have been confirmed with infections and over twenty-three thousand patients have died in the U.S.
The Federal and State governments have enforced lockdowns on business activities and large gatherings in several places. Many businesses and employees have also voluntarily decided to shut down and stay at home for self-quarantine to reduce the spread of this new virus.
State and Federal governments realize that banning commercial activity at this scale will cause many businesses, non-profits and self-employed individuals to go out of business. If employees don’t receive salaries and landlords don’t get rent, it could lead to massive unemployment, poverty, and meltdown of real estate value far worse than the 2007 crisis.
On the other hand, if businesses are forced to pay rent and salaries, they will go bankrupt because they are not generating any revenue. It’s a catch-22 situation and the US Government’s solution is to inject a huge sum of money into the economy.
The CARES Act
To prevent an economic collapse the government announced a relief program for businesses, non-profits and self-employed individuals. The Coronavirus Aid, Relief and Economic Security (CARES) Act was passed on 27th March by the Congress and approved by the President. The Act oversees a $2.2 trillion, US Government stimulus package for the economy
Aid will be provided mainly through the Small Business Administration (SBA) which is managing two programs; Payment Protection Program (PPP) and Economic Disaster Injury Loan (EDIL).
Payment Protection Program (PPP)
This is mainly a loan advancement program that is offered to businesses and non-profits. It can be used to pay employee salaries, rent and utilities.
The program is assigned $349 billion right now. Only small business organizations with fewer than 500 employees are eligible. No collateral is required and loans of up to $10 million can be availed for a period of up to 2 years.
Announcements indicate that the program will run until 30th June and interest will be charged at 1%.
Economic Disaster Injury Loan (EDIL)
The EDIL program is a smaller program with a total sum of $10 billion. It can be used to get both grants and loans.
Qualifying businesses and non-profits can get a grant of up to $10,000 through this program that can be used to cover working capital, inventory costs, equipment purchases, and other operating costs.
Eligible persons can also get a loan of up to $2 million to address any actual “economic injury” that they’ve sustained as a direct consequence of the COVID-19 pandemic. The loan term is 30 years, and the interest rate will be 3.75%.
Individual and Unemployment Benefits
All U.S. residents with an adjusted gross income of up to $75,000 ($150,000 for married couples) will get a one-time payment of up to $1,200 through a rebate system. Couples are also eligible for an additional $500 per child.
The stimulus also includes nearly $25 billion in food assistance for low income families, including nearly $16 billion for SNAP and nearly $9 billion for child nutrition.
Employees who lose their jobs as a result of COVID 19 will get $600 per week for up to four months in addition to the regular state unemployment benefits.
Other Benefits for Individuals and Specific Industries
Benefits for other sectors include the following.
- Student Loan payments have been suspended for six months.
- Airline industry will get $32 billion in grants and loans.
- Hospitals will get $117 to meet expenses and emergencies.
- Tenants facing economic difficulties due to COVID-19 shall be given forbearance for 4 months on federal mortgage-backed properties by landlords.
- Travel industry related carveouts for cruise lines, hotels and restaurants.
Corona Virus is one of the worst cases of global pandemics in recent times, and the government has announced a package to match the gravity of the situation. During the 2007 crisis, the US Government had set up an $800 billion package to assist the U.S. economy, which was later increased to $1 trillion. At the moment the US’ initial stimulus efforts have over doubled that figure, and will likely grow in the coming months.
In the months following the worst of this situation, there will be a need for lawyers taking Coronavirus related matters like employment, fraud, medical malpractice, business insurance claims and other legal matters. Our website has collected and listed attorneys willing to take on such challenging issues. Get the legal support and representation you need to meet your needs and answer your questions.