CARES Act Financial Relief Summary

UPDATE : To address high volume of applications, on April 24 the U.S. Congress passed additional funding for the CARES Act. Starting April 27, the U.S. Small Business Administration (SBA) will resume loan application acceptance. Follow updates on SBA Coronavirus Relief Options for more details.

Hundreds of billions in funds are available to support small businesses impacted by COVID-19. To help you understand how you may benefit, we’ve put together this summary. As new bills and revisions can continue to evolve, we encourage you to consult with a specialist to address any specific concerns you may have prior to utilizing any of the programs below.

CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act has allocated $377 billion for small business relief:

$350 billion in loan forgiveness grants
$17 billion in aid for small businesses with existing Small Business Administration (SBA) loans
$10 billion in support of Economic Injury Disaster Loans (EIDLs)
$265 million in support of SBA resource partners’ training and assistance to small businesses

There are two primary loans as a result of CARES: the Paycheck Protection Program (PPP) and the updated Economic Injury Disaster Loan (EIDL). Due to high volume of applications it is advised to begin preparation early if you are interested in applying. To understand which programs are best suited for your business, we recommend reaching out to a trusted lender or financial advisor.

The Paycheck Protection Program (PPP)

The Paycheck Protection Program (PPP) forgives up to 8 weeks of operating expenses for approved business owners who maintain payroll through the end of June 2020. Any other payments made from the loan can be deferred by 6 months.

Forgivable operating expenses include:

Payroll
Employee benefits
Mortgage interests incurred before February 15, 2020
Rent and utilities under agreements enacted before February 15, 2020
State and local taxes

Who’s eligible?

You are a business that has less than 500 employees (including sole proprietors, self-employed, and independent contractors). For further guidelines on SBA size standard qualifications, refer here.
You have never been suspended or excluded from a federal agency’s loan program.
You are not presently involved in bankruptcy.
You do not have any prior default or delinquent loans with the Small Business Administration (SBA).
Your business does not have owners currently subject to criminal charges.

How is it different from other loans?

It has a higher maximum loan amount compared to other SBA loans, with maximum amount set at $10 million.
A portion of your loan can be forgiven if you correctly used the loan to cover eligible operational expenses and maintain the same amount of employees in the same period as last year.
Eligibility for loan forgiveness starts eight weeks after the loan start date, with a maximum 10 year maturity after application. The SBA is planning to issue additional implementation guidance and regulations regarding the loan forgiveness process.
You only require application approval from an SBA-approved lender.
You are not required to provide personal guarantee and collateral.
You are not required to conduct the Credit Elsewhere Test.

What are the terms?

Terms are up to 10 years with capped interest rate at 4% per annum with no prepayment penalties.

What else should I know?

Your qualified loan amount is dependent on your average monthly payroll costs, with maximum amount set at $10 million.
The loan cannot be covered for compensation in excess of $100,000 for individual employees.
Your loan forgiveness amount only covers the principal amount and does not include interest.
Your loan forgiveness amount can be potentially lowered if you reduce pay or employment.

What is the application process?

You will need to fill out the application form found here and also submit supporting documentation to an SBA-approved lender. For further consultation and guidance, contact your bank or SBA-approved lender. You can find the most active SBA lenders here.

Important Dates

April 3, 2020: applications begin

June 30, 2020: application deadline

Economic Injury Disaster Loan (EIDL)

The Economic Injury Disaster Loan (EIDL) provides businesses working capital needs or normal business operating expenses during emergencies. CARES also provides an additional provision where small businesses can now receive an advance grant of up to $10,000 after application receipt to help meet immediate obligations, which does not need to be returned.

You can use the advance grant to help you meet immediate obligations, including:

Employee paid sick leave
Costs of material goods
Rent/mortgage payments

Who’s eligible?

You are a business that has less than 500 employees (including sole proprietors, self-employed, and independent contractors).
Your are a business that was in operation on January 31, 2020.
Some additional restrictions may apply, verify eligibility here

How is it different from other loans?

If an applicant receives an advance grant but is later denied an EIDL loan, the advance grant does not need to be repaid.
You are not required to provide personal guarantee for loans less than $200,000.
You are not required to conduct the Credit Elsewhere Test.

What are the terms?

Terms are up to 30 years with interest capped at 3.75% interest per annum for qualified businesses, and 2.75% interest per annum for non-profit businesses.
Your first month of payment is deferred a full year.
Due to ever-changing estimates on rates, please refer to your lender or financial advisor to confirm terms and rates.

What else should I know?

The maximum loan amount is $2 million.
The advance grant amount is decided on a case-by-case basis, with the maximum being $10,000.
The advance grant can only be applied to expenses from January 31, 2020 to December 31, 2020.

What is the application process?

You will need to fill out the online application form found here and also submit supporting documentation to the Small Business Administration (SBA). The SBA should disburse the advance grant within three days upon receipt of application.

Important Dates

September 3, 2020: application deadline

Can I apply for both loans?

Yes. However, ensure both loans are not allocated to the same business expenses, as your loan forgiveness amount from the Payment Protection Plan (PPP) may be lowered.

If you receive the $10,000 advance grant, $10,000 will be subtracted from the amount forgiven under your Payment Protection Plan (PPP) loan.

Tax Relief

The CARES Act also provides new tax provisions that can further assist your business needs. Do note that due to the complexity and ever-changing nature of the government’s COVID-19 response, tax provisions are constantly being revised and updated. As the below is an overview, we encourage you to consult with a tax specialist to ensure accuracy and compliance when filing your tax returns.

Employee Retention Credit for Employers

Receive payroll tax refunds by maintaining your staff for wages paid between March 12, 2020 and January 1, 2021 and receive tax credits of 50% of qualified wages, or up to $5,000 per employee.

Who’s eligible?

The credit is available to all employers regardless of size. Qualifying employers must fall into one of two categories below, and must not have taken any small business loans, including the Paycheck Protection Program.

You are an employer whose operations have been fully or partially suspended due to government restrictions related to COVID-19
Your gross receipts are below 50% of the comparable quarter in 2019. (Once your gross receipts go above 80% of a comparable quarter in 2019, you no longer qualify after the end of that quarter.)

How can I claim the tax credit?

Report your business’s total qualified leave wages and related credits for each quarter in your federal employment tax returns
To receive the credit earlier, you can account for the credit by either accessing federal employment taxes or requesting an advance from the IRS
Learn more here

Families First Coronavirus Response Act (FFCRA)

By abiding to FFCRA employer obligations of providing paid sick and family leave to your employees between March 12, 2020 and January 1, 2021, your business is eligible for additional tax credits.

Who’s eligible?

Your business has less than 500 employees, and
Your business is subject to Emergency Paid Sick Leave Act (EPSLA) and the expanded Family and Medical Leave Expansion Act (FMLA)

How can I claim the tax credit?

Report your business’s total qualified leave wages and related credits for each quarter in your federal employment tax returns
To receive the credit earlier, you can account for the credit by either accessing federal employment taxes or requesting an advance from the IRS
Learn more here

Optional Delayed Payment of Payroll Taxes

Employers can delay paying their portion of employees’ social security payroll tax. The amount owed between March 27, 2020 to January 1, 2021 can be paid in two installments:

50% until December 31, 2021
Remainder until December 31, 2022

Who’s eligible?

You are either an employer or a self-employed employee, and
You have not received forgiveness of a Small Business Act loan under any other CARES Act provision

How can I defer my payroll tax payments?

The Treasury Department will issue new guidelines regarding how to make the deferred payments. You may want to speak to a trusted tax specialist to confirm you are eligible.

Additional resources:

Small Business Administration (SBA) Coronavirus Relief Options

U.S. Department of the Treasury Assistance for Small Businesses

Find Local Assistance from a local SBA office or SBA partner

CDC Small Business Finance (SBA Partner)

The summary provided above is for general informational purposes only, and should not be construed as professional legal or financial advice.

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