Covid-19 Relief Acts

What the $2 Trillion CARES Act Means for Small Business Owners

Last updated April 22, 2020.

As of April 16, 2020, funding for CARES Act PPP loans has been depleted.

As of April 22, 2020, more PPP funding is on the way! Last night, Congress passed a bill that provides an additional $331 billion for the now-depleted PPP program. The House votes on the bill next (as soon as today), to be signed into law by the president shortly after.

It's being reported that PPP applications and funding could reopen as soon as Friday!

The $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on Friday, March 27. 

The legislation includes a number of business-boosting relief programs, the largest of which is the Small Business Association's (SBA) Paycheck Protection Program or PPP.

As of Wednesday night (April 15), the SBA is reporting that 1,562,000 PPP applications have been approved, totaling over $329 billion.

The good news is that loan applications have officially been approved by the SBA, and money should be in the accounts of more than 1.5 million small business owners shortly.

One PPP loan tracker puts the total estimated loan disbursement figure at $16.4 billion as of Wednesday night. Stories have begun to emerge of small business owners receiving funds already, such as:

  • A dental office in Iowa received $114,000 on April 13
  • A snack food supplier in New Jersey received $83,700 on April 10
  • A fitness equipment seller in Texas received $412,000 on April 10

Hopefully, if you've applied, money will be deposited into your business account in the coming days as approved loans are processed.

If you'd like to read up on these loans and other relief available through the $2 trillion CARES Act, continue reading...

The text of the bill can be read on the official Congress website right now.

Here's what we know about how this will affect small businesses, and how to take action asap.

So far, reporting on the bill indicates that it includes:

  • $349 billion for small business loans 
  • $50 billion for companies who retain employees on payroll to cover 50% of workers' paychecks
  • SSA payroll tax deferment (6.2%) for companies
  • $500 billion in loans for larger distressed companies
  • $130 billion for hospital funding
  • $150 billion for state and local governments 

The CARES Act primarily provides relief to small business owners through SBA loans.  There are essentially two types of loans. We created a helpful chart to breakdown each loan, their differences and what those differences might mean to you...

 Payroll Protection Program (PPP) Loans Economic Injury Disaster Loans (EIDL)Economic Injury Disaster Grants
What is it?A new loan program designed to help business owners maintain payrollAn existing loan program designed to help business owners pay for immediate disaster-related expensesA cash advance that is distributed with the completion of any EIDL application
Who can apply?
  • Businesses with fewer than 500 employees 
  • Nonprofits and co-ops with fewer than 500 employees
  • Sole proprietors
  • Self-employed people
  • Independent contractors
  • Businesses and co-ops with fewer than 500 employees 
  • Nonprofits
  • Sole proprietors
  • Self-employed people
  • Independent contractors
  • Businesses and co-ops with fewer than 500 employees 
  • Nonprofits 
  • Sole proprietors
  • Self-employed people
  • Independent contractors
Is there a fee to apply?NoNoNo
Is there a deadline or cut off date to apply?Yes — currently June 30, 2020Applications will only be available as long as a disaster is declared in your areaApplications will only be available as long as a disaster is declared in your area
How can the money be used?
  • Payroll (existing and re-hires)
  • Group health benefits
  • Salaries and employee commissions
  • Interest on mortgages
  • Rent
  • Utilities
  • Debt interest incurred before Feb. 15, 2020
  • Fixed debts
  • Accounts payable
  • Other bills that otherwise cannot be paid due to disaster impact
  • Fixed debts
  • Accounts payable
  • Other bills that otherwise cannot be paid due to disaster impact
Can this loan be forgiven?Yes, with caveats (more on this below)NoThis is not a loan — it a cash advance that does not need to be paid back (effectively a cash grant)
How can I apply?Through lenders. Inquire first with your preferred institution. You can find SBA-approved lenders in your area here. More institutions will be approved to offer these loans in the coming weeks.Directly through the U.S. Treasury online here.Directly through the U.S. Treasury online here.
How long will it take to get approved?Unknown. Current estimates are 2+ weeks. Timing will likely depend on your chosen lender.Usually 2-3 weeks from filing an application.Within 3 days after filing an application.
How much money can I get?The lesser of:
  • $10 million
  • 2.5x your average monthly payroll for the proceeding 12 months
Up to $2 millionUp to $10,000
Can I pay everyone on my payroll with this loan?No. This loan cannot be used to pay individuals earning more than $100,000 annually.YesYes
When does repayment start?Up to one year from approvalUp to one year from approvalNo repayment necessary
What would my interest rate be?No more than 4.0%, to be determined by lenders
  • For-profit businesses: 3.75% 
  • Nonprofit businesses: 2.75%
No repayment necessary
What are the terms?Up to 10-year term after forgiveness.Up to 30 year. Terms vary by case.No repayment necessary
Do I have to offer a personal guarantee or collateral?NoLoans over $25,000 may require collateral and $200,000 may require a personal guarantyNo — this is effectively a grant
What's the fine print on forgiveness?At least 75% of your loan must be used for payroll.
Loan forgiveness will be equal to the amount paid by the borrow for:
  • payroll costs,
  • mortgage interest payments
  • rent
  • utilities
  • and other interest payments
made over the course of an 8-week starting from the date the loan is approved.
Your forgiveness amount will be reduced if:
  • full-time employee headcount is reduced
  • salaries/wages decrease

Only the first $10,000 is forgiven in the form of a cash advance.
Even if you are eventually denied an EID Loan, you do not have to repay the $10,000 advance.
None needed — this is a grant.
Anything else I should know?If you've laid off workers or reduced salaries prior to this loan, you should re-hire staff and/or return wages to their previous amounts once the loan is approved in order to obtain full loan forgiveness.Recipients of this loan may not apply for PPP Loans for the same purposes.
Existing EID Loans may be refinanced into PPP loans.
Grant recipients may still apply for a PPP loan.
The amount of this grant ($10,000) is taken into consideration when determining PPP loan forgiveness.

The recently-passed CARES Act includes a number of business-boosting relief programs, the largest of which is the Paycheck Protection Program or PPP. The PPP portion of the CARES Act authorizes up to $349 billion for small businesses in the form of forgivable loans. These loans are designed give small business owners the means and motivation to avoid layoffs and continue paying workers directly. You are eligible for PPP if:

  • You have less than 500 employees
  • You're a sole proprietorship
  • You're self employed
  • You're an independent contractor
  • You're a private nonprofit 
  • You're a veterans organization
  • You're a tribal business (as described here)

Note: Self-employed individuals and independent contractors cannot apply until April 10, 2020. In brief, here are the highlights of PPP loans:

  • Loans should amount to 8 weeks of payroll plus 25% 
  • $10 million is the maximum loan amount
  • Loan payments can be deferred for 6 months
  • The application window is April 3, 2020, through June 30, 2020
  • Repayment is deferred for 6 months
  • Loans are handled through lending institutions (not the government)
  • The most you can borrow is 2.5x your average monthly payroll costs (up to $10 million)

Keep in mind that there are some provisions in PPP loans regarding your borrowable amount. These CANNOT be included when calculating how much you can borrow include: 

  • income taxes
  • compensation for annual salaries exceeding $100,000
  • compensation paid to employees residing outside the U.S. 

Here are some VERY important facts about getting this loan forgiven:

  • Loan forgiveness is tied foremost to maintaining full payroll
  • Portions of the loan used for rent, utilities and mortgage interest can also be forgiven, but the total amount of those costs should be less than 25% of the total loan
  • At least 75% of your loan must be used for payroll in order to be fully forgiven
  • Forgiveness will be reduced if your workforce headcount declines or if salaries/wages decrease (compared to your pre-coronavirus expenses)
  • The forgivable period lasts 8 weeks (starting from the date the loan is approved)

You should be able to apply for PPP through your current lender. Here is the list of PPP-approved institutions:

  • And existing SBA 7(a) lender
  • Any federally insured depository institution
  • Any federally insured credit union
  • And Farm Credit System institution that is participating

You can find currently eligible PPP lenders here.

Recently, nontraditional finance companies PaypalSquare and Intuit Quickbooks were approved as PPP lenders to distribute loans to small business owners. These companies will begin rolling out their own PPP lending programs and accepting applications shortly. 

This approval comes as loan disbursement reportedly rises to $230 billion out of $350 billion available to small businesses nationwide.

If your bank is not currently offering the program, they may offer it at a later time as more institutions apply for approval and are enrolled in the program. If you'd like to get started on your application, you can download a sample form from the SBA here.

Helpful PPP links, websites and PDFs:

Note: The Inc./U.S. Chamber of Commerce town halls have been extended into an ongoing series to discuss funding options available to small business owners. You can register for the next town hall and watch recordings of previous sessions here.

So, what can you do right now to ensure your small business benefits from this stimulus?

Contact your bank TODAY. Discuss your options.

The CARES Act also provides funding for another important source of relief for small business owners — Economic Injury Disaster Loans (EID Loans).

Unlike PPP loans, which are processed and delivered through established lending institutions, EID Loans are handled directly by the U.S. Treasury. Meaning you can apply online right now.

If you apply for an EID Loan, you will be given a $10,000 grant as an advance a few days after applying, and this grant does not have to be repaid — even if you are eventually denied the loan.

Again, the disaster loan cash advance is essentially a free grant. Money in your pocket that you don't have to pay back.

You can apply for an EID Loan here.

Now, you may be wondering...

How will this bill affect my workers and other workers all over the country?

Here's what we know about how this bill affects workers:

The bill includes relief for American workers in the form of $1,200 one-time payments to employees making less than $75,000, scaling down $5 for every $100 the taxpayer makes. Working parents are eligible to $500 in relief per dependent child. It's being reported that relief payments are capped at $3,000.

In addition, unemployment benefits have been boosted and will include relief for gig economy workers like freelancers and independent contractors who are not employed full time by a single employer. Examples of gig economy workers include Uber drivers and delivery service drivers.

Disclaimer: PostcardMania is not a financial institution and any financial decisions you or your business undertakes should be made in close consultation with you bank or chosen financial professional. We're just trying to gather information relevant to small businesses, streamline it and present it to you daily.

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