On Friday, March 27, 2020, the federal government passed the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The U.S. Senate Committee on Small Business & Entrepreneurship has published a short guide to the programs and initiatives that were included in the CARES Act that were intended to assist business owners. The highlights include an emergency loan that can be forgiven if used to retain (or rehire) employees, expanded Economic Injury Disaster Loans (EIDLs), and Emergency Grants up to $10,000. Check out the Business Owner’s Guide for more detail. Here is an overview:
Paycheck Protection Program
This program is intended to provide capital to cover the cost of retaining employees. These are government-backed loans modeled after the existing SBA 7(a) loan program. PPP loans will be available through the SBA and other banks, credit unions and lenders that already provide 7(a) loans. These loans can be forgiven as long as employers continue paying employees during the eight weeks following the origination of the loan; if they do, then the amount they spent on payroll costs, mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven. This program would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. If you have employees and want to keep them on or bring them back for 8 weeks, this is a good program for you.
Economic Injury Disaster Loans (EIDLs) and Emergency Economic Injury Grants
Changes to the CARES Act expand eligibility for EIDLs and provides an emergency advance of up to $10,000 for small businesses harmed by COVID-19. The advance does not need to be repaid under any circumstance and can be used to keep employees on payroll, pay for sick leave, or pay business debts, rent and mortgage payments. You must apply for an EIDL and then request the advance. (See below.) Sole proprietors with or without employees and independent contractors are eligible for an EIDL.
Other Changes That are Good to Know
Small Business Debt Relief Program (if you already have a non-disaster SBA loan or take one out now, the SBA will cover all loan payments on these loans for six months); counseling and training through local Small Business Development Centers, Women’s Business Centers, or SCORE mentorship chapters; payroll tax credits and deferments.
The CARES Act also expanded unemployment to cover the self-employed. This applies if you are a sole proprietor, independent contractor, or incorporated LLC (if you have an LLC, and you elected S-Corp. status and you paid yourself wages, then to the extent of those wages you are an employee of your company and would go through the regular unemployment process). Unemployment goes through the states, and each state is taking a different approach to rolling those benefits out. You need to check your state’s requirements (and you may need to wait to apply).
How to Apply for an EIDL
Applications for an EIDL are online at the SBA (click here). You apply for this in order to request the Grant. Banks and credit unions will need some time to catch up to provide the PPP loan and Debt Relief program. You can apply for more than one of these programs, but you must use them to pay for different things (i.e., you can’t get money from two different places to pay for the same thing.) For most dog trainers, behaviorists, and walkers, I expect that an EIDL grant to pay business expenses plus unemployment to replace lost wages will make the most sense.