What You Need To Know Now: CARES Act 101

By Kyle Hotchkiss

The economy is still treading water.  Many small businesses are scrambling to do business differently to avoid shutting down or lay-offs. Entrepreneurs are a resourceful and creative group, but this is a tough place to be.   

For small businesses everywhere who are trying to find a way through this economic crisis caused by the COVID-19 pandemic, this is what you need to know now: 

Last week Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES) which provides financial assistance to the American people in many ways, some of them being financial assistance, debt relief, grant, and loan forgiveness programs for small businesses. These are those programs and their qualifiers in a nutshell:

Who is eligible for these programs?

  • Small businesses with 500 employees or less
  • Sole proprietors
  • Independent contractors
  • Self-employed
  • Tribal small business
  • Non-profits

What programs are available?

  • Paycheck Protection Program (PPP)
  • Emergency Economic Injury Disaster Loans (EEIDL) and Emergency Economic Injury Grants
  • Small Business Debt Relief Program
  • Business Counseling and Training

Let’s take a look into these programs real quick:

1. Paycheck Protection Program (PPP)

  • Receive up to $10 million
  • Calculate your possible maximum loan amount by finding the average payroll expenses over the course of the last year. Then calculate 250% of that one month average. For example: 

Let’s say your average monthly payroll expense is $50,000. You’re then going to multiply that with 2.5. That would result in a maximum loan amount of $125,000.

  • Eligible for loan forgiveness and deferment up to 12 months
  • You can use this loan to cover payroll, healthcare benefits, utility payments, lease payments, and mortgage interest payments.
  • If your loan is not forgiven then it will convert into a 10 year loan or at 4% interest
  • Some banks are already accepting applications

2. Emergency Economic Injury Disaster Loans (EEIDL) and Emergency Economic Injury Grants

  • Up to $10,000
  • Does not have to be paid back if awarded the grant
  • Can be used in conjunction with a PPP loan
  • First apply for the EEIDL and then request the advance
  • To apply click here.

3. Small Business Debt Relief Programs

  • Applies to Small Business Administration (SBA) loans
  • Provides relief from 7(a), 504, and microloans
  • Covers principal, interest, and fees for six months
  • For more information click here.
  • To apply click here.

4. Business Counselling and Training

No one is an island in this pandemic. Remember there are low cost and free counselling services that you and/or your business can use to help you find a solution. Here are four great sources: 

SBDC: Small Business Development Center

WBC: Women’s Business Center

SCORE (*always free*)

MBDA: Minority Business Development Agency

What sort of documents should I prepare before I apply for these programs?

  • IRS 941 form
  • January 2019 – February 2020 payroll expenses
  • 2019 complete financials (profit/loss)

Please, for the sake of your business, apply now rather than later. What the world looks like in 6 months for you and your business is completely dependent on the decisions you are making today. Let’s make sure small businesses are here to stay.