Guide to CARES ACT Small Business Relief – COVID-19

The coronavirus pandemic is affecting small businesses all across America. Things are changing fast during the COVID-19 outbreak.

In today’s post we’re going to help you navigate this challenging time by going over several ways you can get cash from the Coronavirus Aid, Relief, and Economic Security Act also known as the CARES Act.

Now that the CARES Act is law, what steps do you need to take to make sure you can get money as efficiently as possible.

Let’s go over each of the programs.

Economic Injury Disaster Loans

The SBA’s Economic Injury Disaster Loans (EIDLS) are not new loans, they have been available for disasters. What’s different is this is the first time the program has defined a virus or pandemic as a disaster.

By making this declaration, businesses in every state are now eligible to apply for an Economic Injury Disaster Loan.

Here are the terms in the SBA’s EIDLs:

• Loans up to $2 million
• Repayment term is 30 years
• Interest rates are 3.75% for small businesses and 2,75% for non-profits
• First month’s payment is deferred 1 year from the date of the promissory note
• No loan fees, guarantee fees or prepayment fees

Requirement: You must have been in business by January 31^st to qualify. You can’t start a business now and receive this kind of grant.

From the passage of the CARES Act, $10 billion is allotted for EIDLs and $350 billion for Paycheck Protection Loans to help small businesses across the country.

The EIDLS expanded provisions include the following:

• Approval for an EIDL can be approved by the SBA solely on an applicant’s personal credit score. It’s also important to note, a prior bankruptcy does not disqualify you either.
• A loan smaller than $200k can be approved without a personal guarantee. Also, they are not requiring real estate as collateral. They will accept a general security interest in business property.
• An applicant can receive a $10k emergency cash advance as a grant that can be forgiven if the funds are spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying financial obligations that can’t be made due to loss revenues.
• Access to EIDLs expands for sole proprietors and independent contractors.

The CARES Act also allows you the ability to obtain credit through other sources. This means you can go through our business credit card funding program to further increase your access to working capital. Even if you already have a line of credit you can still apply for an EIDL.

How do You Apply for an Economic Injury Disaster Loan (EIDL)?

Apply directly at https://www.sba.gov/funding-programs/disaster-assistance

As of March 30, the new streamlined online application is up and running. It’s crucial to apply now, there will be a lot of demand for this relief.

*Make sure to apply for Economic Injury for the Coronavirus, rather than physical damage due to another disaster (that is a different declaration number).

Paycheck Protection Program Loan Guarantee

Another program under the CARES Act is the Paycheck Protection Program Loan Guarantee. In this program, the Small Business Administration (SBA) backs small business loans issued by local lenders. This loan program is available through June 30, 2020.

Who is eligible for this loan program?

• Small businesses with less than 500 employees and select types of businesses with less than 1,500 employees
• 501 (c)(3) non-profits with less than 500 workers and some 501(c)(19) veteran organizations in operation before February 15^th, 2020.
• Self-employed individuals, sole proprietors, freelance and gig economy workers can also apply but you have to be in operation before February 15^th, 2020.

Here are the terms of the Paycheck Protection Program Loan Guarantee

• Loans are given 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.
• Maximum interest rate under this loan program is 0.5%
• Loan repayment term is 2 years
• No personal guarantee or collateral required
• Payments are deferred for 6 months
• Part of the loan may be forgiven and not counted as income, if it’s spent during the 8 weeks on operating expenses

What is the loan forgiveness provisions?

The loans are forgiven when the money from the loan is used for any of the following costs:

• Payroll costs, excluding prorated amounts for individuals with compensation greater than $100k
• Rent in keep with a lease in force before February 15, 2020
• Utilities such as electricity, gas, water, telephone, or internet access expenses for services which began before February 15, 2020
• Group health insurance premiums and other healthcare costs

Important note – In order for the loan amount to be forgiven, you must maintain the same average number of employees for the first 8-week period beginning on the origination date of loan as you did from February 15, 2019 – June 30, 2019 or from January 1, 2020 until February 15, 2020.

The U.S. Chamber of Commerce offers a step-by-step calculation. CLICK HERE for the details.

How do you apply for the Paycheck Protection Loan?

You can apply through your local lending institution. First, you must certify that your company qualifies as a small business.

CLICK HERE for the small business size standards per the SBA

Still have questions?

For additional information be sure to check out https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Both of these programs can provide relief if your business is struggling due to the COVID-19 pandemic. You can apply for both types of loans as long as the funds are covering different expenses.

In addition to these loans, there are other funding solutions we offer such as business credit card funding, lines of credit and loans. For a free pre-qualification review go to http://businessfundingreview.com

Looking to build your business credit? Become a member of my Business Credit Insiders Circle and gain access to a proven step-by-step business credit building system. A system that provides you access to vendor lines of credit, fleet cards, business credit cards with and without a PG, funding sources and lenders that report to all the major business credit bureaus. Submit your name and email below for details and receive a free business credit building audio seminar ($497 value) =>

To Your Success in Business and in Life! Be safe.

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About the author

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, Business.com, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’,’American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.