The CARES Act: $2 Trillion Stimulus Package Includes Small Business Loan Relief

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. It is a significant federal bill that provides major economic stimulus to groups deemed hardest-hit by the Coronavirus epidemic – including small businesses, unemployed workers, and students.

The CARES Act allocates $349 billion for struggling businesses, which is funneled into two main programs managed by the Small Business Administration (SBA): the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program.

The Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) is designed to provide loan relief to small businesses that are struggling businesses to stay afloat amid the COVID-19 crisis. PPP loans are intended to help businesses maintain their workforce and keep their staff on payroll.

Business entities affected by the Coronavirus pandemic that may qualify for a Paycheck Protection Program (PPP) loan include:

  • Sole proprietors, independent contractors, and self-employed persons
  • Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
    • 500 employees, or
    • That meets the SBA industry size standard if more than 500 employees
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 workers per location

This loan relief program is available through June 30, 2020. A PPP loan does not require any personal guarantees or collateral, and there are no fees to obtain the loan. It has a 1.0% interest rate and a maturity of two years. PPP loan payments are automatically deferred for six months, and the loan will be fully forgiven as long as the following conditions are met:

  • The business's employees are kept on payroll for at least eight weeks, and
  • The funds are only used for payroll, utilities bills, rent, and interest on mortgages. (At least 75% of the borrowed money must be used for payroll in order for the loan to be forgiven.)

Businesses can apply for a PPP loan through any qualified SBA 7(a) lender, federally insured credit union, federally insured depository institution, or Farm Credit System institution that’s participating in the program.

To apply for a Paycheck Protection Program loan, visit the SBA's PPP website where additional information can also be found.

The Economic Injury Disaster Loan (EIDL) Program

The CARES Act includes a provision for the SBA's Economic Injury Disaster Loans (EIDLs), which are designed to assist small businesses that are experiencing financial difficulties and temporary loss of revenue due to the Coronavirus crisis. The CARES Act removes some of the red tape that's usually involved with obtaining an EIDL and makes it easier for businesses to get assistance.

The EIDL "Emergency Advance" program is designed for entities affected by COVID-19, including the following:

  • Small businesses with fewer than 500 employees (including sole proprietorships, independent contractors, and self-employed persons)
  • Private non-profit organizations
  • 501(c)(19) veterans organizations

The EIDL can give a small business up to $10,000 of economic relief that does not have to be repaid. The funds will be available to the business entity within a few days after a successful application.

To apply for an Economic Injury Disaster Loan (EIDL) Emergency Advance, please visit the SBA's EIDL website where additional information can also be found.