Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act) on March 27. The historic stimulus package includes important provisions for small businesses, outlined below.

Paycheck Protection Program

  • Authorizes $349 billion for SBA 7(a) loans through the end of 2020
  • Increases the government guarantee under the SBA 7(a) loans to 100%
  • Eligible
    • Small business, 501(c)3, or veteran’s organization with 500 employees, or the applicable size standard for the industry as provided by SBA, if higher
      • Includes sole-proprietors, independent contractors, and other self-employed individuals
    • Waives some of the affiliation rules (i.e., for franchises)
    • Impacted by COVID-19
  • Loan covers February 15-December 31, 2020
  • Increases the maximum 7(a) loan amount to $10 million
  • Allows complete deferment of 7(a) loan payments for not more than one year
  • Requires SBA to pay principal, interest, and any associated fees owed on the defined loans for a six-month period
  • Increases SBA Express loan to $1 million
  • Loan Forgiveness
    • Equal to the amount spent during an eight-week period after the origination date of the loan on payroll costs (including salaries, paid sick/medial leave, insurance premiums), interest payment on any mortgage, payment of rent, and payment of utility
    • Amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year
      • Will not be penalized if re-hired workers previously laid off at beginning of the period
    • Canceled indebtedness will not be included in borrower’s taxable income
  • Lenders:
    • Allows additional SBA lenders to be approved through the Department of Treasury
      • Loans go through banks, not SBA
    • Allows lenders to make decisions on eligibility and creditworthiness
    • For eligibility, does not require lenders to determine ability to repay
    • Collateral, personal guarantee, and credit elsewhere requirements waived
    • Interest rates may not exceed current rates provided by SBA on 7(a) loans
  • By taking an SBA Disaster loan you potentially limit your ability to use this program

Emergency EIDL Grants

  • Authorizes $10B for EIDL Grants
  • Eligible
    • Startups, cooperatives, and ESOPS with fewer than 500 employees or any individual operating as a sole proprietor or an independent contractor
  • Offered based solely on an applicant’s credit score
    • Personal guarantees on advances and loans below $200K, requirement that business be in operation for at least one year before disaster, and credit-elsewhere requirements are waived
  • Eligible entities who have applied can request a grant of no more than $10,000
  • Eligible entities who have applied for an EIDL loan can request an advance on their loan of no more than $10,000, which must be distributed to applicant within three days
  • Requires that an advance payment be considered when determining loan forgiveness if the applicant transfers into the SBA’s 7(a) program
  • Entities may only receive and EIDL loan and a 7(a) loan if they received the EIDL loan between 2/15/20 and 3/31/20

Delay of Payment of Employer Payroll Taxes

  • Employers can defer their portion of Social Security tax
  • Payments of Deferred taxes
    • 50% December 31, 2021
    • Remaining December 21, 2022

Modification of Net Operating Losses

  • Losses from 2018, 2019 or 2020 can be carried back 5 years
    • Temporarily removes taxable income limitation allowing NOLs to fully offset income

Written by David Zoller

As BRAC’s Manager of Governmental Affairs, David Zoller is responsible for the organization’s governmental relations and advocacy efforts and managing other projects related to economic competitiveness and quality of life.