Highlights and helpful links about the CARES Act and related financial resources and programs to support small business.
The globe remains gripped by the coronavirus COVID-19 pandemic. We continue to follow its effects on small businesses across the nation. Alongside you, we are anxiously awaiting news related to support, relief, and financial assistance. We’ve compiled highlights from the CARES Act and related financial resources below.
With the COVID-19 reality of shelter-in-place and social distancing, we are seeing unprecedented pressure on small business cash flow. Financial assistance is available through numerous programs, including government grants and loans, business credits, deferred payments, and free trials. The key is that these offerings are evolving – especially as financial institutions operationalize to support them – so it is important to stay informed. Here are a few highlights as of March 31, 2020.
The most recent hot topic is the support made available by passage of the $2 Trillion CARES Act (Coronavirus Aid, Relief and Economic Security) on Friday, March 27, 2020. In addition to funding provisions for individuals, unemployment, and corporations, it includes $377 billion in funding for small businesses (fewer than 500 employees) and nonprofits. Key elements of the relief are Economic Injury Disaster Loans (EIDLs), cash advance grants of up to $10,000, and the Paycheck Protection Program (PPP). The U.S. Small Business Administration (SBA) is the primary source for information about these resources: you can sign up for updates via www.SBA.gov/Updates and follow the SBA on Twitter at @SBAgov.
Economic Injury Disaster Loans (EIDLs)
Economic Injury Disaster Loans and (up to) $10,000 cash advances are allocated through a single streamlined application, found on the SBA’s Disaster Assistance page. If you previously applied for an EIDL and also want to apply for the cash advance, you need to reapply for an EIDL.
The streamlined application includes a checkbox to indicate “I would like to be considered for an advance of up to $10,000.” If you do not see this, you should reapply if you want consideration for the advance.
EIDL and Cash Advance Highlights
- EIDLs offer up to $2 million in assistance and may be used to pay fixed debts, payroll, accounts payable, and other bills that cannot be paid because of the disaster’s impact.
- Access to the EIDLs is broad, including sole proprietors or independent contractors, tribal businesses, cooperatives, Employee Stock Ownership Plans (ESOP) with fewer than 500 employees, and nonprofits.
- The interest rate for small businesses is 3.75%.
- The interest rate for non-profits is 2.75%.
- EIDLs can be approved by the SBA based solely on the applicant’s credit score–no repayment ability or tax return is required. For loans less than $200,000, no personal guarantee is required.
- Applicants may receive the cash advance to cover immediate operating expenses even if they don’t qualify for the EIDL. These funds can be forgiven if they are used for maintaining payroll, paid leave, and obligations that cannot be met due to revenue loss.
- With the CARES legislation, EIDLs can be secured even if the applicant has another line of credit available elsewhere.
- As with any financial decision, read the fine print and consult your accountant or trusted advisor before signing on the dotted line.
Paycheck Protection Program (PPP)
The Paycheck Protection Program is an SBA loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The SBA will forgive loans if all employees are kept on the payroll for eight weeks and the loan is used for payroll, rent, mortgage interest, or utilities. This is separate from EIDLs and cash advances and requires a separate application through any existing SBA 7(a) lender or any participating federally-insured depository institution, federally-insured credit union, and Farm Credit System institution.
On April 16, 2020, the SBA announced it is unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. No new applications will be accepted.
On April 3, 2020, the SBA announced that if a borrower received an EIDL between January 1, 2020 and April 3, 2020 and it was used for payroll costs, a PPP loan must be used to refinance the EIDL loan (and the amount of the PPP loan is increased by the outstanding EIDL, subject to the $10mm cap). The SBA will not allow borrowers to hold both, starting April 3, 2020.
Paycheck Protection Program Highlights
- As of April 16, 2020,the SBA announced it is unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. No new applications will be accepted.
- As of March 31, 2020, the PPP is still being operationalized across financial institutions. You need to check with your lender to see if they are ready to accept applications and if there are documents or data you can prepare in advance.
- Access to PPP loans is broad and includes small businesses with fewer than 500 employees, select types of business with fewer than 1,500 employees, 501(c)(3) nonprofits with fewer than 500 workers, the self-employed, sole proprietors, freelance, and gig economy workers.
- Businesses engaged in the following activities are not eligible for PPP as of April 3, 2020 guidance from SBA:
- Engaged in Lending
- Life Insurance Companies
- Passive Businesses
- Engaged in Legal Gambling
- Engaged in Political Lobbying
Further detail on ineligible businesses is available starting on page 105 of the SBA Lender and Development Company Loan Programs.
- The loan will be forgiven (and not counted as income) if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely-high subscription, at least 75% of the forgiven amount must have been used for payroll). Pay attention to the fine print of loan forgiveness, as there are requirements for maintaining the average number of employees you had from February 15, 2019 to June 30, 2019 or from January 1, 2020 to February 15, 2020 for the first eight weeks of the loan.
- Loan payments will be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
- Forgiveness is based on the employer’s maintenance or quick rehire of employees and the maintenance of salary levels. Forgiveness will be reduced if the number of full-time employees declines or if salaries and wages decrease.
- A PPP loan has a maturity of 2 years and an interest rate of 1.0%. (Note, this was updated on April 3 by SBA; it was previously anticipated to be 0.5%.)
- Remember that accountant or trusted advisor you consulted about the EIDL? Talk to them about the PPP and read the fine print.
Important EIDL and PPP Updates as of April 16, 2020
- On April 16, 2020, the SBA announced it is unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. No new applications will be accepted.
- Financial institutions anticipate having final details and being able to accept PPP loan applications on Friday, April 3, 2020. Monitor your lenders and the SBA for the most up to date information.
- Starting today (April 3, 2020), with the issuance of the final rule, borrowers cannot apply for both an Economic Injury Disaster Loan (EIDL) and a PPP loan.
- If a borrower received an EIDL between January 1, 2020 and April 3, 2020 it does NOT impact their ability to apply for a PPP loan.
- If an EIDL loan received between January 1, 2020 and April 3, 2020 was used for payroll costs, your PPP loan must be used to refinance your EIDL loan (and the amount of the PPP loan is increased by the outstanding EIDL, subject to the $10mm cap).
- If an EIDL was received prior to January 31, 2020, borrowers cannot apply for a PPP loan.
- The anticipated PPP loan rate was originally 0.5%; the SBA updated it to 1.0% rate.
- The NAICS-based test for businesses with greater than 500 employees is limited to the employee size thresholds (e.g. not including previously articulated revenue size thresholds).
- The “alternative rule” allowing businesses with less than $15 million of tangible net worth and $5 million of net income does not appear to apply.
More is More: Resources Abound
- Google Ads is giving advertising credits in a $340 million program to support small businesses with active accounts in 2019; no application is necessary.
- Google is offering advanced Hangouts Meet video conferencing to G Suite customers through July 1, 2020.
- Facebook announced the launch of a $100 million program for small business grants and ad credits for 30,000 businesses. Applications are not yet available. You can learn more and signup for program updates.
- Facebook has also launched a Small Business Resource Hub — a curated collection of Facebook resources and links to programs from the SBA, US Chamber, and other trusted organizations.
- Payroll services like ADP and Gusto Pay are maintaining COVID-19 resource dashboards within their applications. If you use a payroll service, monitor it for additional sources of information.
- Check with your local SBA or Chamber of Commerce office to see if you qualify regional relief. The U.S. Chamber of Commerce maintains a running list of available coronavirus resources.
- Financial institutions like insurance companies, banks, and credit card companies may be willing to waive fees or defer payments. These opportunities are case by case; contact your institution directly.
Information Overload? Reference This List of Helpful Links
- “What’s Inside the Senate’s $2 Trillion Coronavirus Aid Package?”
An overview of the CARES Act, including a helpful graphic from NPR.
- “Getting Cash for Your Small Business Through the CARES Act”
A breakdown on the CARES Act program funding as it relates to small businesses from Forbes.
- Paycheck Protection Program from PNC Bank
FAQs and examples of how PNC Bank is managing PPP while waiting for final details.
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