On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act or “CARES Act” (H.R. 748) was signed into law by the President. The CARES Act is historic in scope and size, and includes programs specifically designed to help small businesses that have been harmed by the COVID-19 pandemic. Below we outline two of the programs you may find useful.
CARES Act: Two Loan Programs for Small Businesses:
- The Paycheck Protection Program (“PPP”) provides for a loan equal up to 250% of your business’s average monthly payroll costs. The loan funds may be used for most payroll costs, rent, mortgage payments, and certain pre-existing debt obligations. The PPP loan may be wholly forgiven if the funds are used for permissible purposes and if certain conditions regarding retention of employment levels and compensation are met.
- Economic Injury Disaster Loans (“EIDL”) provide for loans of up to $2 million, which may be used for similar purposes as PPP loan funds. However, there is no double dipping – borrowers may not borrow to cover the same expenses from both loan programs. The EIDL loans have to be repaid and come with generally favorable interest rates (3.75%), payment deferment, and an emergency advance of up to $10,000. If a business does not apply for the PPP, this emergency advance (only)will be treated as grant.
We have prepared a table comparing the PPP and EIDL programs that you can access here, and another table that outlines the requirements for loan forgiveness for the Paycheck Protection Program that you can access here. Regulations providing additional guidance on the loan programs are expected to be released as early as April 3, 2020. In the meantime, you may also find this summary by the US Chamber of Commerce helpful:https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final.pdf
The Small Business Administration (“SBA”) expects to be accepting applications for the Paycheck Protection Program through SBA approved lenders by April 3, 2020. In the meantime, if you are interested in applying for a PPP Loan, we suggest you contact your existing lender to learn whether they will be participating in the PPP. Small businesses can apply for the EIDL loans online now at https://disasterloan.sba.gov/ela/.
We hope you find this overview helpful. If you have any questions, please feel free to reach out to us. We remain fully accessible via email, phone, and video conference, and look forward to connecting with you now, as well as continuing to work with you in a more normalized, post-Covid-19 business environment.