The Coronavirus Aid, Relief and Economic Security (CARES) Act has passed. The historic stimulus package includes important provisions for small businesses, including:
- Paycheck Protection Program (SBA 7(a)) – Business loans up to $10M made directly by private, local banks and CDFIs, which will enhance speed of processing and delivery. Interest rates are capped at 4%. The loans, if used on payroll and other defined operating expenses in a defined time period, are forgivable.
- Economic Injury Disaster Loans (EIDL) – Loans made directly by the SBA of up to $2M with interest rates of 3.75%, which can be used on payroll and other defined operating expenses. These loans are not forgivable, but if the EIDL loan is related to COVID-19 and is made on or after January 31, 2020, the business may apply for a forgivable Paycheck Protection Program loan with an option to refinance that loan into a PPP loan up until June 30, 2020.
- Delay of Payment of Employer Payroll Taxes – Employers can defer their portion of social security taxes over the next two years. Fifty percent could be deferred through the end 2021, and the remaining could be deferred through the end of 2022.
- Modification of Net Operating Losses – Net operating losses arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years, and the taxable income limitation to allow an NOL to fully offset income has been removed. This change can be used to amend prior year tax returns to provide additional liquidity.
More details can be found here.