Three CARES ACT Programs to Assist Small Businesses and Nonprofits
(Updated March 31, 2020)
The Coronavirus Aid, Relief, and Economic Security Act (CARES ACT) was enacted into law on March 27, 2020. It provides assistance to businesses, nonprofits and individuals in meeting the economic challenges they face right now from the Covid-19/Corona Virus Pandemic. Below is a summary of three programs in the CARES ACT that can provide meaningful economic aid and relief to our businesses and nonprofits.
1-Paycheck Protection Program Loans (w/Loan Forgiveness)
- Paycheck Protection Program Loans (PPP loans) provide capital to cover the cost of retaining employees and are available to businesses and nonprofits with 500 or fewer employees that have been in operation on February 15, 2020. (Loan cannot be obtained if taxpayer chooses to take the CARES ACT employee retention tax credit).
- The amount of the loan is limited to the lesser of (i) $10M or (ii) the borrower’s average total monthly “payroll costs” for the 1-year period ending on the date the loan is made multiplied by 2.5, plus any refinanced loan under the EIDL program obtained after 1/31/2020.
- Payroll costs generally include employee salaries and tips, retirement benefits, severance payments, state and local taxes on employee compensation, but does not include compensation paid to employees and independent contractors in excess of $100,000/year, and amounts paid to persons who reside outside the US.
- Basic Terms of a PPP Loan:
- No collateral required.
- Maximum interest rate of 4%.
- Maximum term of 10 years.
- No interest or principal payments are required for a period between 6 months and 1 year (though interest will accrue from the day the loan is made).
- Prepayment penalties are prohibited.
- This loan can be forgivable in full or in part.
- Subject to certain criteria these loans are forgivable in full or in part if used for qualified expenses in within 56 days of funding. Qualified expenses, generally speaking, are:
- Compensation to employees including payments for vacation, family or medical leave, severance payments, group healthcare benefits (including premiums), retirement benefits, and employment taxes;
- Interest payments on mortgages and other debt obligations incurred before February 15, 2020; and
- Rent and utilities.
- PPP loans are being made available through banks that already service SBA loans and additional lenders are being brought online. Contact your bank to apply. The SBA has posted a sample application at:
- These loans are available through June 30, 2020. Lenders will be able to begin processing them on April 3, 2020.
2-Economic Injury Disaster Loans and Emergency Economic Injury Grants
- Economic Injury Disaster Loans (EIDLs) provide low interest loans of up to $2 million to cover operating, payroll and other expenses that could have been met had the Pandemic not occurred. The standard requirements for EIDLs have been waived, making these loans much easier to obtain than in the past. Note: Current understanding as of the date of this advisory is that businesses and nonprofits may apply for and obtain both EIDLs and PPP loans, provided that the loan funds aren’t used to cover the same expenses, i.e., no double dipping.
- Emergency Economic Injury Grants provide for quick infusions of small amounts of cash (up to $10,000) to cover immediate expenses for businesses that have submitted applications for Economic Injury Disaster Loans.
- EIDLs and Emergency Grants are available directly through the SBA.
- Applications and information are available on the SBA's websites. Check the SBA district office website site for your region:
3-Small Business Debt Relief Program
- The Small Business Debt Relief Program provides coverage on SBA loan payments, including principal, interest, and fees, for six months on non-disaster SBA loans (i.e., 7(a), 504, and microloans). This relief is also available to new borrowers who take out loans within six months of the CARE Act’s enactment.
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