CARES ACT Small Business Provisions

Paycheck Protection Program

The Paycheck Protection Program (PPP) will provide small businesses and other entities with the following:

  • Help small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn to make payroll and cover other expenses from February 15 to June 30.
  • Zero-fee loans of up to $10 million limited to a formula tied to payroll costs and can cover employees making up to $100,000 per year.
  • Up to 8 weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels. Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation.
  • Principal and interest is deferred for up to a year and all borrower fees are waived.
  • Eligible borrowers would be required to make good faith certification that they have been affected by COVID-19 and will use funds to retain workers and maintain payroll and other debt obligations.
  • The “credit elsewhere” test and collateral and personal guarantee requirements would be waived during the covered period.
  • This temporary emergency assistance through the U.S. Small Business Administration (SBA) and the Department of Treasury can be used in coordination with other COVID-financing assistance established in the bill or any other existing SBA loan program.
  • Requires the SBA Administrator to set a cap on how much a bank can earn to process loan applications and prioritize underserved borrowers, including those in rural communities, minorities, women and veterans.

Emergency Economic Injury Grants

Emergency Economic Injury Grants provide the following:

  • An advance of $10,000 to small businesses and nonprofits that apply for an SBA economic injury disaster loan (EIDL) within three days of applying for the loan.
  • EIDLs are loans of up to $2 million that carry interest rates up to 3.75 percent for companies and up to 2.75 percent for nonprofits, as well as principal and interest deferment for up to 4 years.
  • The loans may be used to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.
  • The EIDL grant does not need to be repaid, even if the grantee is subsequently denied an EIDL, and may be used to provide paid sick leave to employees, maintaining payroll, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
  • Eligible grant recipients must have been in operation on January 31, 2020.
  • The grant is available to small businesses, private nonprofits, sole proprietors and independent contractors, tribal businesses, as well as cooperatives and employee-owned businesses.
  • The emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven in the Paycheck Protection Plan.
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