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Coronavirus Relief: Who is Eligible for Small Business Loans from the CARES Act?

by Tim AustinApril 3, 2020 12:00 PM

As the Coronavirus impacts businesses everywhere, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide some financial support during difficult times. The $2 trillion Coronavirus stimulus package contains a $349 billion lending program for small businesses, along with other means of relief.

For small business owners, this news provides a form of respite in a difficult time. Of course, now these employers may ask how these loans work and whether they can access them. Read on to find out if your business can apply for a loan and how they impact your operations.

Money from a CARES Act small business loan granted to a business impacted by the Coronavirus. 

Is My Business Eligible for CARES Act Loans?

As long as your business has fewer than 500 employees, it’s eligible for a loan. The stimulus package applies to businesses from all states and territories and even extends to self-employed individuals, independent contractors, and sole proprietors. The CARES Act does prioritize certain types of businesses, such as those in under-served and rural markets or businesses that are less than two years old.

What Financial Assistance is Available for the Coronavirus?

The CARES Act lays out a couple of different forms of financial relief for small businesses. The most notable of these is the $349 billion Paycheck Protection Program, which will provide partially forgiven loans depending on how businesses use them.

Paycheck Protection Program Loans

According to the CARES Act, businesses can receive a loan of 2.5 times the businesses’ monthly payroll up to $10 million. The exact amount your company can receive is based on how much you paid your employees between Jan. 1 and Feb. 29, plus 25 percent of that total amount. These loans have a fixed interest rate of one percent regardless of business type (the final rates, underwriting standards and other terms and conditions are to be determined). The Small Business Administration also notes that it will “forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll and certain other expenses following loan origination” if you are able to maintain your workforce.

In addition, the CARES Act incentivizes employers for using loans for what it considers allowable purposes. By doing so, your Paycheck Protection Program loan can be forgiven and you’ll only need to pay back accrued interest on your loan if you use the loan for the following:

  • Payroll costs
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • Employee salaries
  • Interest payments on any mortgage
  • Rent and utility payments
  • Interest payments on any other debt obligations that were incurred before Feb. 15, 2020

Economic Injury Disaster Loans

In addition to the $349 billion lending program, the CARES Act also allotted $10 Billion for the Small Business Administration’s (SBA) Economic Injury Disaster Loans (EIDLs). According to Forbes, the expanded provisions mean that:

  • EIDLS can be approved by the SBA based solely on your credit score (a prior bankruptcy won’t disqualify your business)
  • EIDLs smaller than $200,000 don’t need a personal guarantee for approval (real estate is also not required as collateral)
  • Borrowers can receive $10,000 in an emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage/lease payments, or repaying obligations that cannot be met due to revenue loss
  • EIDLs are now accessible for sole proprietors, independent contractors, tribal businesses, cooperatives, ESOPs with fewer than 500 employees, and all non-profits

How Do I Apply for CARES Act Loans?

If you’re want to apply for a Paycheck Protection Program loan, you can do so at any lending institution approved to participate by the SBA. You can apply for EIDLs online at the SBA website

Contact us if you have any HR related questions on how to keep things running smoothly through these difficult times. 

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