CARES Act Supports Small Businesses and Charities

Renner Business News; March 31, 2020

Small businesses and charities can get assistance to meet emergency needs, pay employees and cover SBA loan payments under the Coronavirus Aid, Relief, and Economic Security (CARES) Act by applying for these Small Business Administration (SBA) programs through the SBA and SBA-approved lenders.

  • The Paycheck Protection Program provides cash to cover the cost of retaining employees.
  • Emergency Economic Injury Grants offer quick cash for emergency needs.
  • Economic Injury Disaster Loans help cover COVID-19 shortfalls.
  • The Small Business Debt Relief Program helps business owners cover payments on SBA loans.

Paycheck Protection Program (PPP)

Small businesses and charities harmed by COVID-19 are eligible for assistance under this program if they employ 500 or fewer employees. Eligible employers can apply for a PPP loan to cover eight weeks of payroll, health benefits, interest on existing loans, rent and utilities. The available loan amount is set at 2½ times monthly payroll.

Wages paid for emergency COVID-19 sick and family leave are not included in payroll for the purposes of determining the size of the loan. Those wages are already eligible for a 100% refundable payroll tax credit.

Nonprofits applying for assistance under the PPP must be exempt under IRS Code Section 501(c)(3) or 501(c)(19).

After eight weeks, borrowers can apply for loan forgiveness to the extent proceeds were used for allowable purposes. Owners’ pay is allowable up to the rate of $100,000/year. Amounts not forgiven become loans with repayment terms of up to 10 years, at interest rates of up to 4%, with payments deferred for six months from the date the loan was received.

Businesses that have an existing Economic Injury Disaster Loan (EIDL) can refinance it into a PPP loan, adding it to the PPP loan amount.

The SBA will administer the PPP within their 7(a) Loan Program through SBA-approved lenders.  New regulations are expected to allow almost all banks to make the loans.

Economic Injury Disaster Loans and
Emergency Economic Injury Grants

Small businesses and nonprofits with 500 or fewer employees may apply for an Economic Injury Disaster Loan (EIDL) to pay expenses that the business could have paid if not for the COVID-19 crisis. Nonprofits not exempt under 501(c)(3)—but exempt under some other 501(c) Code Section—are eligible for an EIDL as long as they are not principally engaged in religious activities or primarily engaged in political or lobbying activities.

Businesses and nonprofits that are eligible for an EIDL are also eligible for a $10,000 Emergency Economic Injury Grant. Applicants can request the grant as an advance when applying for the EIDL.  The SBA will provide the $10,000 advance within three days of receiving the application. The advance does not need to be repaid.

Businesses that have already received an EIDL or Emergency Grant may also apply for a PPP loan.  EIDLs may not be used to cover the same costs as the PPP loan. The Emergency Grant will be subtracted from the amount of the PPP forgiven.

The SBA uses standards for determining whether a business is a small business based on size and industry.

Eligible businesses and nonprofits can apply for an EIDL online with the SBA.

Small Business Debt Relief Program

Small businesses with existing SBA loans can obtain debt relief covering all loan payments on non-disaster SBA loans for six months. Eligible loans include 7(a) loans, 504 loans and microloans.

There are many details included in the CARES Act and still more details to be worked out. To find out in more detail how these provisions apply to you, contact your financial professional.

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