Congress just replenished the landmark CARES Act with $370B in funding earmarked for small businesses. The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, outlines a series of measures aimed at helping small businesses that have been adversely affected by the COVID-19 pandemic. The legislation offers tax rebates, tax-filing extensions, and modified tax treatments along with business loans and emergency grants aimed at bolstering small businesses and their employees during these challenging times. This second wave of funding puts more money on the table for small businesses seeking Paycheck Protection Program loans and Economic Injury Disaster Loans.
Since the very beginning, CoverHound and CyberPolicy have been solely focused on supporting the small businesses that make up the foundation of this nation’s economy. We have put together this little cheat sheet that outlines some strategies to utilize stimulus funds available to small businesses like yours.
- Paycheck Protection Program (aka PPP) // $310 billion available
PPP loans of up to $10 million cover payroll-related expenses. These loans have a few qualifications, mostly related to employee counts and business size, offer loan forgiveness opportunities and require no personal guarantees or collateral. PPP funds will be administered by banks, credit unions, and other financial institutions (SBA 7a approved lenders).
- Economic Injury Disaster Loan (aka EIDL) // $60 billion available
These loans can be obtained in amounts up to $2 million, with standard interest rates of 3.75% for small businesses and 2.75% for nonprofit businesses with various repayment terms for each. EIDL will be administered by the SBA itself.
An emergency advance of up to $10,000 can be obtained to cover business expenses that will ensure immediate and ongoing operations. In the event that an advance is disbursed and the application is denied, the advance does not need to be repaid.
Repayment Terms & Loan Forgiveness
PPP Repayment Interest rates for PPP funds have a fixed rate of 0.5%. PPP participating lenders cannot charge guarantee fees, yearly fees, prepayment penalties, or require collateral for the loan; and lenders are required to offer borrowers payment deferment of 6-12 months.
PPP Loan Forgiveness Small businesses that receive PPP funding to cover eligible expenses through June 30th, 2020, can apply for loan forgiveness; essentially turning the loan into a grant.
Eligible expenses for PPP loan forgiveness
- Payroll costs
- Interest on mortgage
- Rent payments
- Utility payments
- Compensatory wages for tipped employees