Types of Small-Business Relief Through the CARES Act, and How to Get It

The CARES Act, signed into law amidst the ongoing COVID-19 health and economic crisis, provides for two kinds of small business loans through the Small Business Administration (SBA). For owners of small businesses, this could be crucial relief in a lean time. 

The two types of assistance described below — the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) Emergency Advance — are available now. Businesses can, and should, apply for both. “We encourage you to apply as quickly as you can because there is a funding cap,” said the Treasury in a statement, according to Vox.

The quick take: PPP is meant to help a business compensate its employees through the crisis, while an EIDL Advance is an immediate injection of cash.

Tribal businesses described in section 31(b)(2)(C) of the Small Business Act are eligible for these programs. More broadly speaking, a business or nonprofit must have 500 or fewer employees to be eligible, although some businesses with more than 500 employees may qualify, and hospitality or restaurant businesses with no more than 500 per location may also be eligible. Sole proprietorships, independent contractors and self-employed persons are also eligible.

Paycheck Protection Program (PPP)

The Paycheck Protection Program is a new product from the 7(a) Loan Program designed to allow businesses to pay workers at full salary, and was planned with an eight-week timeframe in mind. Up to 25% of the loan money can also be used for rent, mortgage interest, or utilities. Funding up to $10 million is available for each small business, and the loans are 100% forgivable providing the business meets certain conditions. (As Vox points out, all of this may turn problematic if a business is still unable to reopen its doors after the eight weeks have passed.) 

For loan forgiveness, the business must not lay off any employees, and must rehire any who’ve already been laid off by June 30. Additionally, businesses must keep salaries and wages the same. If these conditions aren’t met, forgiveness will be reduced. Unforgiven loans will carry an interest of 0.5%, and interest payments will be deferred for the first six months.

These loans are available on a first-come, first-served basis, and a business can apply for only one loan — so the SBA encourages them to apply for the maximum amount.

The SBA advises businesses to consult their local lender to find out whether they’re participating. The loans may be obtained through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating, with other regulated lenders eligible upon approval.

Small business owners may want to visit the SBA’s PPP page to read the overview themselves, and to consult the SBA’s summary for a deeper dive into the details and conditions. As of this writing, there is no downloadable application form on the SBA site, but the program is live for small businesses and nonprofits, who should contact their banks to get the ball rolling.

The PPP will also be extended to independent contractors and self-employed individuals, starting April 10.

Economic Injury Disaster Loan (EIDL) Emergency Advance

The second component of the CARES Act that could be significant relief for small businesses is the EIDL Loan Advance, which is an add-on to the existing EIDL program. Small businesses facing hardship can apply for a low-interest loan, which will need to be repaid, and can receive a $10,000 advance on the loan that does not need to be repaid.

Businesses may receive the grant even if they aren’t approved for the loan in full. The EIDL Advance funds will be deposited in three days, according to the Treasury, so this program is ideal for a business that is already suffering and needs a quick influx of cash. The loan itself (the part that needs to be repaid) can be used for a wider variety of purposes than a PPP loan (which is focused on ensuring that employees aren’t left out in the cold).

The EIDL application (in which applicants can request an EIDL Advance) is online at covid19relief.sba.gov.

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