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CARES Act for Small Businesses

Published Monday Apr 6, 2020

CARES Act for Small Businesses

The Coronavirus Aid, Relief, and Economic Security Act or "CARES Act" (HR 748) was signed into law by the President on March 27. The CARES Act is historic in scope and size, and includes programs specifically designed to help small businesses that have been harmed by the COVID-19 pandemic.  The Manchester law firm of Cook, Little, Rosenblatt, and Manson has outlined two of the key programs businesses may find useful.

CARES Act: Two Loan Programs for Small Businesses:

  1. The Paycheck Protection Program (“PPP”) provides for a loan for up to 250% of a business’s average monthly payroll costs. The loan funds may be used for most payroll costs, rent, mortgage payments, and certain pre-existing debt obligations. The PPP loan may be wholly forgiven if the funds are used for permissible purposes and if certain conditions regarding retention of employment levels and compensation are met.
  1. Economic Injury Disaster Loans (“EIDL”) provide for loans of up to $2 million, which may be used for similar purposes as PPP loan funds. However, there is no double-dipping - borrowers may not borrow to cover the same expenses from both loan programs. The EIDL loans have to be repaid and come with generally favorable interest rates (3.75%), payment deferment, and an emergency advance of up to $10,000.  If a business does not apply for the PPP, this emergency advance will be treated as a grant. 

Cook, Little, Rosenblatt, and Manson prepared a table comparing the PPP and EIDL programs, and another table that outlines the requirements for loan forgiveness for the Paycheck Protection Program. Businesses may also find this summary by the US Chamber of Commerce helpful https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final.pdf

To apply for the loans, businesses should contact their existing lenders to learn whether they will be participating in the PPP. Small businesses can apply for the EIDL loans online now at https://disasterloan.sba.gov/ela/.

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