CARES Act Explainer

The recently passed CARES Act does four main things for small businesses:

  1. Created the Paycheck Protection Program which gives small businesses access to low-interest loans, which can be forgiven if used for payroll, utilities, and rent.
  2. Gives $10,000 grants via the Economic Injury Disaster Loan Program. Any amount received via this grant will be subtracted from the amount forgiven in the PPP.
  3. Provides debt relief for small businesses with SBA loans. This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law (though SBA loans are notoriously cumbersome)
  4. Expanded support for small business counseling and training.

Of particular interest to many is the Paycheck Protection Program. The Treasury released its guidance for this program on April 1st. Some of it is good news, some of it may make your life a little more complicated.

CARES Act & PPP Links/Resources:

➡️ A thorough overview of the 4 CARES Act programs for small businesses via the Senate’s Small Business Committee
➡️ A streamlined overview of the CARES Act programs
➡️ PPP details in a helpful chart
➡️ PPP information sheet for borrowers in a Q&A format
➡️ Chart comparing PPP to the Economic Injury Disaster Loan Program
➡️ Sample PPP application form that will help you prepare the needed paperwork

Important things to note for the PPP:

  • Applications opened on Friday, April 3rd for small businesses and sole proprietors. If you are an independent contractor or self-employed, you can apply beginning on Friday, April 10th.
  • At least 75% of the forgiven loan amount must go toward payroll. It can also go toward rent and utilities, but only up to 25% of the forgiven loan amount.
  • Loans have 2 year maturity with 1% interest; payments deferred for 6 months
  • No collateral is required
  • If you have already laid off staff, you can rehire them by June 30th in order to receive the full loan forgiveness, otherwise you may only receive partial forgiveness. “Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.”
  • Borrowers with tipped workers may receive loan forgiveness for the additional wages paid to those employees.
  • The loans will be administered through local lending institutions. If your bank or credit union is not currently an SBA-approved lender, they can apply to be one and participate in the PPP. Try calling or emailing them today to ask if they are participating in the program.

There will be more guidance coming from the Federal government about this program soon, and right now you probably still have a lot of questions.

We’re working to digest all of this information quickly – some things may change or there may be more details than what is listed above.

We suggest getting in touch with your lender to help sort it all out. They won’t have all the answers yet, either, but we’re all working on it!

Next Steps

The CARES Act is a good start, but it is insufficient. Our friends at the Institute for Local Self-Reliance estimates that “the scale of the need…is about $1.2 trillion to cover core costs for small businesses in the most affected sectors” — the CARES Act accounts for less than a quarter of that need.

We are going to keep advocating for our community’s needs to be met. In the meantime, reach out to your elected officials and ask them to continue pushing for support for local businesses.

Read the letter we sent our Congressional Delegation regarding issues with the implementation of the CARES Act.

You can see some of our members highlighting the issues with the PPP below:

Bangor Daily News

Portland Press Herald

CBS News

NPR’s Here and Now

Chicago Tribune

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