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The Coronavirus Aid, Relief, and Economic Security (CARES) Act

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It’s an approximate $2 trillion aid package and sets aside $350 Billion for Paycheck Protection Loans and $10 Billion for Economic Injury Disaster Loans for small businesses.

If your business is struggling because of the current crisis, you may be eligible for loans and/or grants up to $2 million.

Paycheck Protection Loans

This program provides cash-flow assistance through 100 percent federally-guaranteed loans to employers who maintain their payroll during the Coronavirus emergency.


Paycheck Protection loans are available for small businesses (including 501(c)(3) non-profits) with fewer than 500 employees, select types of businesses with fewer than 1,500 employees, and some 501(C)(19) veteran organizations. To be eligible, the business must have been in operation before February 15, 2020. Self-employed, sole proprietors, freelance, and gig economy workers in operation before February 15, 2020 are also eligible to apply.

Loan Terms

Loans are available up to a maximum of the lesser of $10 million or 2.5 times the average monthly payroll costs – including wages for employees making under $100,000, as well as expenses for paid sick leave, healthcare, and other benefits – during the 1-year period before the date on which the loan was made. The maximum interest rate under the program is 4% and the loan term is up to 10 years. No personal guarantee or collateral is required for the loan and payments are deferred up to 6–12 months.

Importantly, part of this loan may be forgiven and not counted as income to you as long as it’s spent during the first 8 weeks on operating expenses.

Loan Forgiveness

The loan forgiveness provisions are generous. Loans are forgiven when the proceeds are used for any of these business expenses:

  • Payroll costs, excluding prorated amounts for individuals with compensation greater than $100,000;
  • Rent pursuant to a lease in force before February 15, 2020;
  • Electricity, gas, water, transportation, telephone, or internet access expenses for services which began before February 15, 2020; or
  • Group health insurance premiums and other healthcare costs.

In order for the amounts to be forgiven, however, you must maintain the same average number of employees for the first eight-week period beginning on the origination date of the loan as you did from February 15, 2019 – June 30, 2019 or from January 1, 2020 – February 15, 2020. If you don’t meet this requirement, the amount forgiven is reduced. And you incur additional reductions if you cut compensation for employees who make under $100,000 by more than 25% as compared to the most recent quarter. Note that the U.S. Chamber of Commerce offers a step-by-step calculation here.

There is an exception, however. There is no penalty for a reduction in employment or wages during the period from February 15, 2020 to April 26, 2020 as long as you rehire employees who you previously laid off or restore any decreases in wages or salaries by June 30, 2020.

Applying for a Paycheck Protection Loan

Apply for the loan directly through your local lending institution. As a business owner, you will have to personally certify that your company qualifies as a small business.

Economic Injury Disaster Loans (EIDLs) and Emergency Economic Injury Grants

EIDLs have always been available in the event of a disaster, but according to the Small Business Administration, this is the first time a virus or pandemic has been defined as a disaster. Because this pandemic has been declared a national disaster, businesses in every state and territory are eligible to apply for EIDLs.

Loan Terms

The terms for the Small Business Administration’s EIDL’s are incredibly favorable:

  • Loans up to $2 million
  • Term is 30 years
  • Interest rates are 3.75% for small businesses and 2.75% for non-profits
  • The first month’s payments are deferred an entire year from the date of the promissory note

The CARES Act instituted expanded provisions for EIDL’s, including:

  • Approval by the SBA based solely on an applicant’s credit score—no repayment ability and no tax return is required and a prior bankruptcy does not disqualify an applicant.
  • EIDL’s smaller than $200,000 can be approved without a personal guarantee.
  • The SBA is not requiring real estate as collateral and will take a general security interest in business property.
  • Borrowers can receive $10,000 in an emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments, or repaying obligations that cannot be met because of lost revenue.
  • The CARES Act expands EIDL access to sole proprietors or independent contractors, as well as tribal businesses, cooperatives, and ESOPs with fewer than 500 employees and all non-profits including 501(c)(6)’s.


EIDLs are available for small businesses (including all non-profits) with fewer than 500 employees – including sole proprietorships, independent contractors, cooperatives and employee-owned businesses, and tribal small businesses – in operation since January 31, 2020.

Applying for an EIDL or Emergency Economic Injury Grant

Apply for an EIDL directly through the Small Business Administration here through the SBA’s streamlined online application. There are no loan fees, guarantee fees, or prepayment fees. And because lending decisions are based on self-certification and the applicant’s credit score, the review process is expected to go quickly.

To access the $10,000 grant, you first apply for an EIDL and then request the advance. Remember, the advance does not need to be repaid under any circumstances, and may be used to keep employees on payroll, pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent, and mortgage payments. Importantly, you can get the emergency grant even if you don’t qualify for additional funds.


Our advice: apply as soon as you can. There will be a lot of demand for these loans and grants.

If you would like assistance with applying for either a Paycheck Protection Loan or Economic Injury Disaster Loan/Grant, please contact Steven A. Thomas ( and we will be happy to assist you.

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