On March 27, 2020, the United States Congress passed and the President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic relief package aimed at assisting workers and businesses impacted by the coronavirus pandemic. The CARES Act features emergency grants and a forgivable loan program for small businesses with 500 or fewer employees.There are also changes to rules for expenses and deductions meant to make it easier for companies to keep employees on the payroll and stay open in the near-term. Sole proprietors, independent contractors and other self-employed individuals are eligible for assistance through the CARES Act as well.
Paycheck Protection Program
The CARES Act establishes the Paycheck Protection Program (PPP), which is one of the most important provision in the new stimulus bill for small businesses as roughly $349 billion is dedicated to this new program. The PPP is designed to provide cash flow assistance with a 100% federally guaranteed loan directly to businesses who maintain their payroll during the COVID-19 emergency. The loans will be forgiven if employers maintain their payroll as it would not only help workers remain employed, but help affected small businesses and the economy to grow quicker after the crisis.
What are the main attractions of a PPP Loan?
The PPP is designed to support all business types with a payroll. The PPP has a number of attractive features:
- Maximum loan of up to $10 million
- Forgiveness of up to 8 weeks of payroll based on employee retention and salary levels. If some employees have already been laid off, the loan can still be forgiven for the full amount of payroll costs if those employees are rehired by June 30, 2020.
- At least 6 months deferral of repayment and potentially up to a year.
- No SBA fees.
What does the PPP Loan Cover?
The PPP loan is only limited to be used for:
- Payroll cost
- Costs related to continuation of group health care benefits
- Employee salaries
- Payment of interest on any mortgage obligation
- Interest on any other debt obligations
- Utility payment
When does it go live?
The PPP goes live Friday April 3, 2020 for small businesses and nonprofits. The PPP application will go live on Friday, April 10, for independent contractors and self-employed individuals.
Where can I apply for PPP?
Businesses can call their current bank or lender directly. The application can be accessed via the SBA’s website here. Businesses can apply if they were harmed by COVID-19 between February 15, 2020 and up to June 30, 2020. You will only be able to apply for a loan up to June 30, 2020.
Emergency Injury Disaster Loans (EIDL)
The CARES Acts has allocated $10 billion in the stimulus bill for the SBA’s Emergency Injury Disaster Loans (EIDL) and has expanded the eligibility for the EIDL.
What has changed with the EIDL?
- Small loans under $200,000 can be approved without a personal guarantee
- Loan up to $2 million
- Businesses that have been in operations since January 31, 2020
- Waived requirement that applicants are unable to obtain credit elsewhere
CARES Act allows for small businesses to apply for an EIDL advance of up to $10,000 which the SBA must distribute within 3 days. You must apply for an EIDL first and then request the advance. The advance does not need to be repaid under any circumstance.
Where to apply
What the advance can be used for?
- Providing paid sick leave
- Maintaining payroll to retain employees
- Meeting increased costs to obtain unavailable materials
- Rent/mortgage payments,
- Any other obligations that can’t be met due to revenue losses
Can a business get an EIDL and PPP loan?
Yes, small businesses can get both an EIDL and a Paycheck Protection Program loan as long as they don’t pay for the same expenses. If an EIDL loan was obtained related to COVID-19 between January 31, 2020 and the date at which the Paycheck Protection Program becomes available, borrowers will be able to refinance the EIDL into the Paycheck Protection Program for loan forgiveness purposes.
For more information and assistance about the CARES Act and small business please check out:
- Guide to the CARES Act from U.S. Senate Committee on Small Business and Entrepreneurship
- Ins and Outs blog post of applying for SBA loans from the City of San Jose's Economics Department
- Coronavirus Aid, Relief, and Economic Security Act: What Small Businesses Need to Know from US Chamber of Commerce
- What's Inside The Senate's $2 Trillion Coronavirus Aid Package from NPR
- How Small Businesses can Get Money from the Stimulus Package
- Congressional CARES Act: What Silicon Valley small business owners need to know (and what we don't know) webinar from Small Business Majority
Al igual, puede leer sobre varias organizaciones que están ofreciendo recursos e información para empresarios/as derivado del COVID-19 en la siguiente página: https://www.sjpl.org/es/blog/small-business-covid-19-resources (puede cambiar el idioma en español si va hacia la esquina de arriba a la izquierda y cambia "Select Language" a español. Para ver un video de como cambiar el idioma, haga click aquí
SBDC Hispanic Satellite/Silicon Valley SBDC at Hispanic Chamber of Commerce
Centro de Negocios Pequeños
Sitio web (si se va la parte baja de su página, podra cambiar el idioma al español si presiona el ícono de la bandera de españa - amarilla con rojo)
1887 Monterey Road, 2nd Floor
San Jose, CA 95112
AnewAmerica Community Corporation
Centro de Negocios Para la Mujer
210 N. 4th Street, Suite 205
San Jose, CA 95112
Otra fuente de información es esta página de recursos desarrollado por la Universidad de Santa Clara: https://www.scu.edu/mobiespanol/covid-19-recursos-para-emprendedores-y-negocios-pequeos/