What business owners need to know about the CARES Act
Update: Additional coronavirus aid has just been passed, including another $320 billion for the Paycheck Protection Program.
President Trump just signed the $2.2T CARES (Coronavirus Aid, Relief, and Economic Security) Act into law to provide economic relief for those affected by the current pandemic. Here’s what small business owners need to know.
What is in the CARES Act?
The CARES Act consists of three major components:
- Loans for struggling businesses (including $367 million specifically earmarked for businesses with 500 or fewer employees), called the Paycheck Protection Program.
- Expanded unemployment benefits, including an additional 13 weeks of benefits, and up to $600 more per week in benefits for up to four months. Self-employed and gig workers will also be covered.
- Payment of up to $1,200 to each individual or $2,400 to each couple, plus $500 for each child under 16. These payments would be phased out for those with incomes over $75,000 ($150,000 for couples).
How will the new stimulus package help small business owners?
For business owners, the part of this plan that may provide the most immediate relief is the Paycheck Protection Program, which provides low-interest loans for small businesses being hit hardest by the outcomes of the pandemic. Here’s what business owners can expect:
- Loans will be handled through the Small Business Administration’s existing 7(a) program. Loans are made by private lenders (banks, credit unions, and other lenders) and are guaranteed by the SBA.
- The self-employed, including gig workers like Uber and Lyft drivers, are eligible.
- The amount that can be borrowed is dependent on your payroll expenses, so you must have paid employee salaries and payroll taxes, or have paid independent contractors. You’ll need to show proof of these payments.
- The purpose of these loans is to provide a cushion so that employers can continue to pay their employees, or can rehire those they have already let go. Part of the loan may be forgiven for employers who retain or rehire workers.
How to apply for a loan
To apply for a loan, go to your current bank and see if they can offer you a loan under this program. There are about 1,800 lenders who are currently authorized to make these loans, and Treasury Secretary Steven Mnuchin has said there are plans to allow any FDIC-insured lender (which includes virtually every bank) to offer these loans.
For more information on SBA loans and the CARES Act, visit the SBA website.
Also, follow our guide to find out how to apply.
The CARES Act increases unemployment benefits for those who have been laid off. The Act extends the period of time that out of work people can collect unemployment benefits for an additional 13 weeks. It also increases the amount of compensation they can get by up to $600 per week.
Unemployment benefits are managed by each state, but they all follow the federal guidelines. If you have had to lay off employees, encourage them to file for unemployment by visiting their state’s unemployment website. The Department of Labor website has information about unemployment insurance and a link to each state’s website.
The contents of this article are provided for informational purposes only and do not constituent, and should not be relied upon as, legal, business or insurance advice related to the needs of any specific person or business.