The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provides nearly $350 billion to fund loan programs for small businesses in the wake of COVID-19. These loans are designed to provide businesses with the capital to maintain their workforce through payroll support, keep the lights on, and help make payments that would have otherwise been paid if not for the disruptions from the pandemic. The two components that provide funding for small businesses are the Paycheck Protection Program (“PPP”) and the Economic Insurance Disaster Loan (“EIDL”).
Economic Insurance Disaster Loan
- Offers eligible applicants up to a $10,000 grant that does not have to be repaid
- Credit history and repayment ability considered
- Small business applicants must demonstrate some economic injury stemming from the coronavirus
- Should be used for working capital costs, not to recoup lost costs or for expansion projects
- No cost to apply
Entities that qualify for the program will be offered loans up to $2 million at an interest rate of 3.75% for small businesses or 2.75% for nonprofit organizations. Companies interested in applying can do so via the SBA’s website. Much like the PPP, eligible applicants include small businesses, sole proprietors, independent contractors, and certain nonprofit organizations.
Paycheck Protection Program
The Paycheck Protection Program (PPP) is an entirely new type of business loan created under the CARES Act to incentivize small businesses to maintain their workforces. Through the PPP, the Small Business Administration will provide strategic loans to eligible businesses in order to pay for vital operating costs such as payroll, rent, mortgage interest, and utilities.
More comprehensive information about Paycheck Protection Program eligibility, loan amounts, loan uses, loan forgiveness, and forgiveness reduction is available under “Small Business Loans and Program Details in the article, “Overview of CARES Act Key Provisions.”