November 19, 2020

RECORDED WEBINAR – The PPP Loan Forgiveness Gates Have Opened: Are You Equipped to Apply?

Download our recorded webinar to hear from the Anders CARES Act Research and Response Team on new details of PPP loan forgiveness you need to know before applying.

The recorded webinar covers the recent Small Business Administration (SBA) guidance on PPP loan forgiveness and insights on:

  • How to work with your bank now that the application portals are open
  • SBA Necessity Questionnaires Forms 3509 and 3510 
  • Strategies for achieving maximum loan forgiveness

Download the webinar below.

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November 10, 2020

PPP with Paul and Dan Video Series

With new updates and legislation evolving quickly around the Paycheck Protection Program (PPP), our CARES Act Research and Response Team has been focused on relaying information you need to know. Two of the team members, Paul C. Rhea and Daniel K. Schindler, are sharing the latest changes around PPP loans and the forgiveness process in their video series: PPP with Paul and Dan.

View each segment of the series below. Check out more CARES Act content in our COVID-19 Resource Center, or learn how we can help your business recover from COVID-19.

November 10, 2020

October 13, 2020

October 7, 2020

September 18, 2020

September 4, 2020

August 28, 2020

August 21, 2020

August 13, 2020

July 24, 2020

July 16, 2020

June 25, 2020
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October 9, 2020

New Streamlined Forgiveness Application for Smaller PPP Loans

Businesses with Paycheck Protection Program (PPP) loans of $50,000 or less can now utilize a simpler forgiveness application. The new application, released by the SBA and U.S. Treasury, is meant to streamline the PPP loan forgiveness process for borrowers and lenders.

Details of the New Application

The new application comes out of a new interim final rule (IFR) providing guidance on forgiveness and loan review processes for PPP loans of $50,000 or less. Borrowers with affiliates that received loans totaling $2 million or more are not eligible to use the new application. Under the IFR, eligible loan borrowers are exempted from any reductions in forgiveness based on:

  • Reductions in full-time equivalent (FTE) employees
  • Reductions in employee salary or wages, and

According to the IFR, of the 5.2 million PPP loans approved by the SBA, about 3.57 million, or $62 billion of the $525 billion, were for $50,000 or less.

Good News for Businesses with Smaller PPP Loans

For borrowers with PPP loans less than $50,000, this is good news as they are not required to perform complicated FTE or salary reduction calculations. Borrowers of $50,000 or less still will have to make some certifications and provide documentation to the lender for payroll and nonpayroll costs.

Before deciding to move forward with the new application, make sure to check with your bank on if and when they are starting to accept applications. View the instructions for completing Form 3508S or the Form 3508S application.

Legislation is continuing to evolve and it’s important to keep up with the latest rules and regulations to make sure you’re making decisions based on accurate data. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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October 7, 2020

Selling Your Business? SBA Clarifies Change of Ownership Rules for PPP Loan Borrowers

Many businesses have received and benefitted from Paycheck Protection Program (PPP) loan funding during the pandemic, but the rules on loan forgiveness have continued to evolve. On October 2, the SBA published a Procedural Notice regarding “change of ownership” in the event that a PPP loan is still outstanding at the time of the sale of a business. It was obvious from the loan documentation that was originally signed, that the sale of a business would be problematic while the loan was still outstanding. Borrowers and advisors have been anxiously awaiting clarification. Highlighted below are the primary areas that were defined.

How does the SBA define “change of ownership”?

The SBA defines a change of ownership in a business when one of the following occurs:

  1. At least 20% of the common stock or other ownership interest of a PPP borrower, including a publicly traded entity, is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity                                                                     
  2. The PPP borrower sells or otherwise transfers at least 50% of its assets, measured by fair market value, whether in one or more transactions
  3. The PPP borrower is merged with or into another entity

When is SBA approval required?

SBA approval is required on all sale transactions, with the exception of any of the following situations where only lender approval is necessary:

  1. The PPP loan is fully satisfied, which means the loan is either:
  2. Paid in full; or 
  3. Forgiven by the SBA (i.e., the SBA has remitted payment to the lender) and any unforgiven amounts are paid in full.
  • In a stock sale or merger:
  • A sale or transfer of less than 50% of the borrower’s common stock or other ownership; or
  • The PPP borrower completes a loan forgiveness application reflecting its use of all loan proceeds and submits it to the lender and puts in an interest-bearing escrow account controlled by the PPP lender funds equal to the outstanding balance of the PPP loan.
  • In an asset sale of 50% or more of the borrower’s assets, if the PPP borrower completes a loan forgiveness application reflecting its use of all loan proceeds and submits it to the lender and puts in an interest-bearing escrow account controlled by the PPP lender funds equal to the outstanding balance of the PPP loan.

What is the borrower required to do prior to the sale?

Prior to the closing of any change of ownership transaction, the PPP borrower must notify the lender in writing of the transaction and provide the lender with a copy of the relevant transaction documents necessary to effectuate the proposed transaction. The lender is required to submit certain documentation regarding the transaction to the SBA within five business days of the completion of the transaction.

Despite the occurrence of a change of ownership, the PPP borrower remains responsible for:

  1. Continued performance of all obligations under the PPP loan;
  2. Certifications made under the PPP loan application, including the certification of economic necessity; and
  3. Continued compliance with all other PPP loan requirements.

The PPP borrower continues to be responsible for obtaining, preparing, and retaining all required forms and documentation and providing these forms and documents to the PPP lender, servicer, or SBA upon request.

The new owners are liable for any unauthorized uses of PPP loan proceeds by the new owner.  If the new owner also had a PPP loan, the PPP loan funds must be segregated and properly allocated among the two borrowers.

Where do we go from here?

Although many questions were answered in this most recent guidance, there is much still that remains unanswered, including:

  • How can I speed up the process if pending M&A activity is imminent?
  • What happens if the bank allowed a sale to already happen prior to the new guidance?
  • What recourse do I have if my bank isn’t accepting applications yet?
  • Who is responsible if SBA reviews a loan years later and nullifies some or all of the forgiveness?

Read the full SBA Procedural Notice.

Open and upfront communication with your bank and/or advisors is critical prior to any transaction. Legislation is continuing to evolve and it’s important to keep up with the latest rules and regulations to make sure you’re making decisions based on accurate data. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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September 28, 2020

Why PPP Loan Fraud is on the Rise

In response to the global COVID-19 pandemic, the US Congress moved extremely quickly to enact the largest economic stimulus bill in modern history. At Anders, we’ve been dissecting the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act), including each of the stimulus elements in the Act. One major portion of that economic stimulus, estimated at $669 billion, came in the form of Paycheck Protection Program loans (or PPP Loans). These PPP Loans were potentially forgivable loans issued to small businesses with the intention of keeping their employees employed.

While PPP loans offered much-needed assistance to many businesses impacted by COVID-19, there have been a few instances where the relief efforts were abused. We are now in the midst of the first wave of notable PPP Loan fraud cases, which presumably will continue to make headlines for quite some time.

Uncovering PPP Fraud

PPP Loan issuance began in earnest in April 2020. In a matter of months, alleged PPP Loan fraud was already being reported across the nation.

In late July 2020, it was reported that a Miami, FL man had been charged with bank fraud for allegedly lying on PPP Loan applications. The alleged fraudster used the PPP Loan proceeds for luxury items such as purchases at Saks Fifth Avenue, luxury hotels, jewelry stores, and most notably a Lamborghini Huracán EVO, valued at nearly $320,000.

On August 4, 2020, the US Department of Justice issued a press release regarding a Houston, TX entrepreneur who allegedly obtained more than $1.6 million in PPP Loans, using those funds to purchase a Lamborghini Urus, a Rolex watch, and real estate among other things.

In September, Reuters reported that according to an internal memo, JP Morgan Chase & Co., one of the many banks tasked with distributing the PPP Loans, was investigating employees who may have been involved in the misuse of federal funds meant to help struggling small businesses hurt by the COVID-19 shutdowns.

Most recently, former NFL wide receiver Josh Bellamy was arrested as one of eleven participants in an alleged $24 million PPP Loan scheme. Bellamy allegedly used funds to purchase luxury goods from Gucci and Dior and withdrew over $300,000 in cash.

These are just a handful of notable PPP Loan fraud examples that have made the news headlines. As of mid-September, the Justice Department had charged 57 people with trying to steal a total of $175 million in PPP Loans, and this is likely just the beginning.

Preventing PPP Fraud

To ensure this type of fraud doesn’t happen in your company, businesses should become familiar with the concept of the fraud triangle, and how it can be a useful tool in understanding fraudulent behavior. Put simply, the concept theorizes that fraud is likely to occur when three elements occur together. Those elements are opportunity, motive/pressure, and rationalization.

The COVID-19 pandemic prompted an unprecedented governmental response in an attempt to prevent millions from losing their jobs.

In a haste to distribute these funds, an unprecedented opportunity for fraudsters was created which would not have been available under normal circumstances. There was no time for the PPP Loans to go through the normal vetting and underwriting procedures required for most commercial loans, as more than 5.2 million PPP Loan applications were prepared and processed during a matter of months.

At the same time, in what was likely the worst economic downturn since the great depression, there was ample motive and pressure for many to commit fraud. That is casting the ever-present motive of greed to the side.

Finally, while we know fraud is not a victimless crime, some may find it easy to rationalize “borrowing” money from the Federal Government. Afterall, the Federal Government just prints the money, don’t they? And who is going to miss a few hundred thousand dollars from a $2.2 trillion relief bill?

In reality, these fraudulent actions hurt us all. Taxpaying citizens are the ones being taken advantage of. Further, people are stealing from a program designed to help struggling businesses keep employees on the payroll during a time of great turmoil.

Sadly, but predictably, these fraud cases are appearing, and unfortunately will likely continue for some time to come but preventing fraud in your own company is key.

If you have any questions regarding PPP Loans or fraud prevention, please contact an Anders advisor below. Learn more about Anders Forensic and Litigation services or how we help businesses with COVID-19 Business Recovery.

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September 16, 2020

PPP Loan FAQ: Forgiveness Timing and Year-End Tax Planning

With the end of the year looming closer, many businesses are focused on ensuring they receive forgiveness for their Paycheck Protection Program (PPP) loan. Business owners are wondering if and when they should apply for loan forgiveness, and what changes are coming from Congress, the SBA and banks. Below we answer common questions around PPP loan forgiveness timing, year-end tax planning and talks of another stimulus package.

PPP Loan Forgiveness Timing

Q: Should I submit my application now? Why or why not?

A: Anders is advising clients to wait until further guidance is released by the SBA and IRS. We do not see any benefits to applying early, and we see more changes as Congress gets closer to passing another stimulus package.

Q: Can I submit my application now?

A: The short answer is yes you can submit. But not all banks are accepting applications.

Q: Can I get PPP loan forgiveness in 2020?

A: Forgiveness timing is still up in the air, but it will most likely be in 2021 based on the bank’s and SBA’s timelines. Certain banks are taking forgiveness applications now, but unless your company has already applied it’s unlikely that forgiveness will happen in 2020. When we have more information Anders will advise clients on best timing to apply, but for now, patience is key as businesses have 10 months to apply after their covered period.

Q: Is there automatic forgiveness for PPP loans under $150,000?

A: No, but there has been language in each bill surrounding automatic forgiveness for smaller loans. Unfortunately, nothing has been passed at this time.


Year-end Planning Related to PPP Funds

Q: Are expenses paid with PPP funds deductible?

A: The IRS’s current position is that expenses paid with PPP funds are not deductible if your loan is forgiven. What is unclear is if the expenses paid with PPP funds are nondeductible for 2020 tax returns or not until 2021 when the loan is forgiven.

Q: Is there anything I should be doing for year-end tax planning regarding my PPP loan?

A: At this time, with so much uncertainty, year-end tax planning related to PPP funds will remain fluid.


Rumors of Another Stimulus Package

Q: Will there be a CARES Act 2.0?

A: It appears likely. The timing and dollar amount are the two largest unknowns. What seems to be important aspects of any bill could include:

  • Second round of stimulus checks for individuals
  • Reallocation of funds between different CARES Act 1.0 programs
  • Adjustments to the Paycheck Protection Program, including a potential second round of funding and clarification of ambiguous guidance
  • IRS corrections and guidance regarding deductibility of expenses paid for with forgiven PPP funds
  • State and local government funding
  • Liability protections
  • Unemployment assistance

Q: When could the next stimulus package be coming?

A: Timing is unclear and ever-changing. Stay tuned for more updates.

Legislation is continuing to evolve and it’s important to keep up with the latest rules and regulations to make sure you’re making decisions based on accurate data. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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August 27, 2020

PPP Loan FAQ: What Not-for-Profits Need to Know About Forgiveness Timing and Tax Planning

With the end of the year looming closer, many organizations are focused on ensuring they receive forgiveness for their Paycheck Protection Program (PPP) loan. Businesses and not-for-profits are wondering if and when they should apply for loan forgiveness, and what changes are coming from Congress, the SBA and banks. Below we answer common questions around PPP loan forgiveness timing, year-end tax planning and talks of another stimulus package.

PPP Loan Forgiveness Timing

Q: Should I submit my application now? Why or why not?

A: Anders is advising clients to wait until further guidance is released by the SBA and IRS. We do not see any benefits to applying early, and we see more changes as Congress gets closer to passing another stimulus package.

Q: Can I submit my application now?

A: The short answer is yes you can submit. But not all banks are accepting applications.

Q: Can I get PPP loan forgiveness in 2020?

A: Forgiveness timing is still up in the air, but it will most likely be in 2021 based on the bank’s and SBA’s timelines. Certain banks are taking forgiveness applications now, but unless your company has already applied it’s unlikely that forgiveness will happen in 2020. When we have more information Anders will advise clients on best timing to apply, but for now, patience is key as businesses have 10 months to apply after their covered period.

Q: Is there automatic forgiveness for PPP loans under $150,000?

A: No, but there has been language in each bill surrounding automatic forgiveness for smaller loans. Unfortunately, nothing has been passed at this time.


Year-end Planning Related to PPP Funds

Q: Are expenses paid with PPP funds deductible?

A: The IRS’s current position is that expenses paid with PPP funds are not deductible if your loan is forgiven. What is unclear is if the expenses paid with PPP funds are nondeductible for 2020 tax returns or not until 2021 when the loan is forgiven.

Q: Is there anything I should be doing for year-end tax planning regarding my PPP loan?

A: At this time, with so much uncertainty, year-end tax planning related to PPP funds will remain fluid.


Rumors of Another Stimulus Package

Q: Will there be a CARES Act 2.0?

A: It appears likely. The timing and dollar amount are the two largest unknowns. What seems to be important aspects of any bill could include:

  • Second round of stimulus checks for individuals
  • Reallocation of funds between different CARES Act 1.0 programs
  • Adjustments to the Paycheck Protection Program, including a potential second round of funding and clarification of ambiguous guidance
  • IRS corrections and guidance regarding deductibility of expenses paid for with forgiven PPP funds
  • State and local government funding
  • Liability protections
  • Unemployment assistance

Q: When could the next stimulus package be coming?

A: Timing is unclear and ever-changing. Stay tuned for more updates.

Legislation is continuing to evolve and it’s important to keep up with the latest rules and regulations to make sure you’re making decisions based on accurate data. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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July 1, 2020

PPP Loan Application Deadline Extended to August 8

The President recently signed into law an extension of the application deadline for the Paycheck Protection Program from June 30 to August 8. As of June 30, approximately $130 billion of the $659 billion program was still unused.

Senator Ben Cardin proposed the extension and the bill passed the Senate by unanimous consent. The House passed the bill on July 1 and the President signed it into law on July 4. The legislation allows small businesses additional time to apply and the possibility for all the funds for the program to be used.

In late July, Congress is scheduled to discuss the next phase of Coronavirus relief with some of Congress hoping for changes to the program. Changes that could be coming include new modifications providing assistance to small businesses and disadvantaged areas. Additional talks are in the works of allowing for a second round of PPP loans for businesses with fewer than 100 employees that have lost a significant amount of revenue due to the pandemic. 

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential business impacts and benefits. Visit our COVID-19 Resource Center for more insights or contact Anders below to discuss how we can help you along the PPP loan process.

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June 30, 2020

What Documents Do I Need to Apply for PPP Loan Forgiveness?

Now that Paycheck Protection Program (PPP) loan forgiveness applications are released; many businesses are wondering what exactly they need to compile to be able to apply. Below we dig into exactly what is needed from applicants, whether you apply using the EZ or standard forgiveness form.

Getting Started

Before you decide which application to use or start collecting documents, below is a list of standard information needed to begin the process.

  • Business Legal Name (“Borrower”) DBA or Tradename, if applicable
  • Type of Tax Return
  • Business Address
  • Business TIN (EIN, SSN)
  • Business Phone
  • Primary Contact E-mail Address
  • SBA PPP Loan Number
  • Lender PPP Loan Number
  • PPP Loan Amount
  • PPP Loan Disbursement Date
  • Employees at Time of Loan Application
  • Employees at Time of Forgiveness Application
  • Economic Injury Disaster Loan (EIDL) Advance Amount
  • Economic Injury Disaster Loan (EIDL) Application Number
  • Payroll Schedule
  • Covered Period
  • Alternative Payroll Covered Period, if applicable

Ready to start the process? Complete our PPP Forgiveness Information Request Form.

Documentation Needed Based on Application Type

Standard PPP Loan Forgiveness Application

If you’re using the standard PPP loan forgiveness form, here is what you will need to submit, according to the SBA:

Payroll:

Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
    • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
    • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state
  • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount (PPP Schedule A, lines (6) and (7)).

FTE:

Documentation showing (at the election of the Borrower):

  • The average number of FTE employees on payroll per week employed by the Borrower between February 15, 2019 and June 30, 2019;
  • The average number of FTE employees on payroll per week employed by the Borrower between January 1, 2020 and February 29, 2020; or
  • In the case of a seasonal employer, the average number of FTE employees on payroll per week employed by the Borrower between February 15, 2019 and June 30, 2019; between January 1, 2020 and February 29, 2020; or any consecutive 12-week period between May 1, 2019 and September 15, 2019.

The selected time period must be the same time period selected for purposes of completing PPP Schedule A, line 11. Documents may include payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941) and state quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state. Documents submitted may cover periods longer than the specific time period.

Nonpayroll:

Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.

  • Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments.

Form 3508 EZ PPP Loan Forgiveness Application

If you’re using the EZ PPP loan forgiveness form, here is what you will need to submit, according to the SBA:

Payroll:

Documentation verifying the eligible cash compensation and non-cash benefit payments from the Covered Period or the Alternative Payroll Covered Period consisting of each of the following:

  • Bank account statements or third-party payroll service provider reports documenting the amount of cash compensation paid to employees.
  • Tax forms (or equivalent third-party payroll service provider reports) for the periods that overlap with the Covered Period or the Alternative Payroll Covered Period:
    • Payroll tax filings reported, or that will be reported, to the IRS (typically, Form 941); and
    • State quarterly business and individual employee wage reporting and unemployment insurance tax filings reported, or that will be reported, to the relevant state.
  • Payment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the Borrower included in the forgiveness amount.
  • If you checked only the second box on the checklist on page 1 of these instructions, the average number of full-time equivalent employees on payroll employed by the Borrower on January 1, 2020 and at the end of the Covered Period.

Nonpayroll:

Documentation verifying existence of the obligations/services prior to February 15, 2020 and eligible payments from the Covered Period.

  • Business mortgage interest payments: Copy of lender amortization schedule and receipts or cancelled checks verifying eligible payments from the Covered Period; or lender account statements from February 2020 and the months of the Covered Period through one month after the end of the Covered Period verifying interest amounts and eligible payments.
  • Business rent or lease payments: Copy of current lease agreement and receipts or cancelled checks verifying eligible payments from the Covered Period; or lessor account statements from February 2020 and from the Covered Period through one month after the end of the Covered Period verifying eligible payments.
  • Business utility payments: Copy of invoices from February 2020 and those paid during the Covered Period and receipts, cancelled checks, or account statements verifying those eligible payments

Please note that these requirements came directly from the instructions for each application provided by the SBA. Download the EZ application instructions or view the EZ application. Download the standard forgiveness application instructions or view the standard forgiveness application.

Ready to start the process? Complete our PPP Forgiveness Information Request Form.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential business impacts and benefits. Visit our COVID-19 Resource Center for more insights or contact Anders below to discuss how we can help you along the PPP loan forgiveness process.

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June 25, 2020

Paycheck Protection Program (PPP) Loan Forgiveness Calculators and Tools

Tracking expenses is an important part of maximizing PPP loan forgiveness. Once you identify which expenses are eligible for PPP forgiveness, it’s time to start keeping track of these expenses and calculate your potential forgiveness amount. The Anders CARES Act Research and Response Team put together tracking tools you can use to make it easier when it comes time to start the loan forgiveness process.

Please note: these calculators provide an estimate based on our interpretation of the current guidelines, and actual loan forgiveness may differ when the SBA and banks release the loan forgiveness reporting forms.

Download the PPP Loan Forgiveness Calculator.

Download the 8-Week Full Time Equivalent (FTE) Calculator.

Download the 24-Week Full Time Equivalent (FTE) Calculator.

Download the Information Checklist to Apply for PPP Loan Forgiveness.

Updated 6/25/2020

Visit our COVID-19 Resource Center for other insights and tools surrounding the CARES Act.

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