Home / Blog Posts / How the CARES Act Helps Small Businesses and Independent Contractors
The historic CARES Act, signed by President Donald Trump on March 27, 2020, provides a $2 trillion stimulus to help mitigate the negative effects of the COVID-19 pandemic.
The package provides broad financial support to healthcare organizations and major corporations. Small business owners and nonprofit leaders, and gig workers need not feel left out.
The CARES Act, which passed with broad bipartisan support, expands the Small Business Administration and provides for a new relief program, Paycheck Protection Program.
Disclaimer: The following information is provided as a means of convenience and on an as-is basis. This content does not constitute legal or accounting advice. Given the nascent nature of the Paycheck Protection Program, not all details are known. We will post further information in new articles as it comes to light. We encourage all readers to visit https://www.coronavirus.gov/smallbusiness/to learn more.
Most business owners and sole proprietors will find that they can use their existing financial providers. The loans are primarily intended to help compensate workers, and the funds can be used for anything from salaries and hourly wages to benefits payments and paid leave, including sick leave. In fact, businesses will also receive advance tax credits if they provide sick leave to employees.
Recipients may also use the PPP funds to pay mortgage, rent, and utility payments, as well as any payments toward existing business debt obligations. The economic stimulus package also expands the Small Business Administration’s Economic Injury Disaster Loan (EIDL) program by $10 billion.
Some businesses have already received EIDL loans due to the pandemic; these recipients may be eligible to refinance these loans with PPP. If you have an existing SBA loan, you may be able to postpone your payments for up to six months.
Note that any SBA-backed loan might impact your eligibility for other forms of assistance.
How do I qualify? The CARES Act established the PPP to provide minimal-requirement relief to a broad range of vulnerable businesses and workers.
How do I get a PPP loan? Unlike with many other forms of government assistance, you can take advantage of the Paycheck Protection Program through your existing financial institution. There is no need to visit any sort of government office or website. Your bank or credit union will have loan officers who can help you apply for SBA-backed loans, including PPP loans.
Get your paperwork together, then call to make an appointment. Remember that social distancing is in effect and many loan officers will be inundated with requests. Before applying, be sure that you have all the articles of incorporation, payroll reports, and other key documents related to your business.
You will need to calculate your expenses for an 8-week period and provide documentation to back up your application. The deadline to apply is June 30, 2020, which is also the last date that your 8-week period can extend. Should you apply on that date, the covered period will be retroactive.
As mentioned previously, the CARES Act not only created the Payroll Protection Program but also boosted the Economic Injury Disaster Loan (EIDL). The two loans are similar, but they have some key differences:
You are not required to offer paid sick leave if you have fewer than 50 employees, but keep in mind that you can receive advance tax payments for offering this benefit. Also, your PPP loan is forgivable if you use the funds to provide any sort of compensation to your employees, including paid leave. I already laid off employees.
Your PPP loan will be forgiven if you rehire those laid-off employees and pay them at least 75 percent of what they were earning before the pandemic. You must do so by June 30, 2020. Remember, the PPP funds are intended to be used to cover payroll for an 8-week period. If you did not lay off employees due to the pandemic, you must retain them and meet the above-described payment threshold in order to have your loan forgiven. Ensure that you are requesting sufficient funds to meet payroll needs for the covered period.
Anyone who runs a business as an individual can apply for a PPP loan to help keep themselves in business. Note that you must have been in business before February 15, 2020. You do not need to put up personal collateral to receive a PPP loan. You need only demonstrate that your business has been impaired by the pandemic and that you have documentation of your regular income and business expenses.
The loan can cover your own payroll and any business facility costs or debt, and you’re eligible for loan forgiveness as long as you use the PPP loan for the protected provisions during the covered period.
For more information, visit https://www.coronavirus.gov/smallbusiness/ or reach out to your financial institution to inquire about what’s right for you.