How Small Businesses Can Get Relief Through The Coronavirus Relief Bill (CARES Act)
While we’re all trying to stay home and practice social distancing to minimize the spread of the coronavirus, many of our small businesses have suffered from the drastic economic downturn due to stay-at-home orders.
On Friday, March 27, the (Coronavirus Aid, Relief and Economic Security) CARES Act was passed to offer economic assistance to small business owners affected by the pandemic. The legislation includes:
- The Paycheck Protection Program
- The expanded U.S. Small Business Administration (SBA) Economic Injury Disaster Loan program
THE PAYCHECK PROTECTION PROGRAMS
The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.
The loan amounts will be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
- Employee and compensation levels are maintained. Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
Loan payments will be deferred for 6 months.
When can I apply?
- Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
- Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
- Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.
Where can I apply?
You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit www.sba.gov for a list of SBA lenders.
Who can apply?
All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries (click HERE for additional detail).
ECONOMIC INJURY DISASTER LOAN AND ADVANCE PROGRAM
The CARES Act also introduced an expansion of the SBA Economic Injury Disaster Loan (EIDL) Program. The goal of the expansion is to offer working capital to qualified small businesses via low-interest loans in amounts of up to $2 million to overcome the temporary loss of revenue.
Companies that have applied for a disaster assistance loan due to COVID-19 can request the $10,000 advance to help cover costs. If the loan application is approved, the SBA must distribute the advance within three days. Applicants are not required to repay the advance, even if they are subsequently denied an EIDL.
To apply for a COVID-19 Economic Injury Disaster Loan, click here.
Check out our website for additional resources.