CARE ACT: Coronavirus Aid, Relief, and Economic Security (CARES) for SMB

In response to the COVID-19 pandemic, you may have seen that the recent Coronavirus Aid, Relief, and Economic Security (CARES) Act will allocate $350 billion to help small businesses keep workers employed.  The key small business policy initiative here is the “Paycheck Protection Program” (PPP) which will be fully backed by federally guaranteed loans.

Perhaps most critical, borrowers who meet certain criteria (e.g. maintain certain workforce levels for a required period) will be eligible to have the loan forgiven.

These are the best informational materials we’ve seen so far that summarize the program, and we would direct you to review these documents for additional information:

• U.S. Chamber of Commerce - Emergency Loans Small Business Guide & Checklist
• U.S. Senate Committee on Small Business & Entrepreneurship - Guide to CARES Act

However, here are some excerpts and FAQs that we think are most relevant:

When and how to Apply?

• Small businesses and sole proprietors can begin applying on April 3rd
• Independent Contractors and self-employed individuals can apply beginning April 10
• The government is advising you to apply as soon as possible given the loan cap on the program
• You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.

Who can apply?

• You are eligible if you are:
• A small business with fewer than 500 employees
• A small business that otherwise meets the SBA’s size standard
• A 501(c)(3) with fewer than 500 employees
• An individual who operates as a sole proprietor
• An individual who operates as an independent contractor
• An individual who is self-employed who regularly carries on any trade or business
• A Tribal business concern that meets the SBA size standard
• A 501(c)(19) Veterans Organization that meets the SBA size standard

• Note these important exemptions from eligibility size requirements:
• The 500-employee limitation only applies on a “per physical location” basis for  businesses in the accommodation and food services sector (NAICS 72)
• Franchises or businesses that receive financial assistance from an approved Small Business Investment Company are exempt from the normal affiliation rules

Who should I contact?

• You can apply for a 7(a) loan with a bank or a mission-based lender.  SBA has a free referral service tool called Lender Match to help find a lender near you.
• If you’re applying through a traditional bank, it helps to work with one that has a track record of processing SBA loans.  Here is a list of the 100 most active SBA 7(a) lenders
• Find local counseling and assistance from the U.S. Small Business Administration (SBA) to speak to a Small Business Development Center (SBDC), Women’s Business Center (WBC), or SCORE mentorship chapter.
• If you are a minority business enterprise, you can also contact one of the Minority Business Development Agency’s Business Centers (MBDCs), who will also receive funding to hire staff and provide programming to help their clients respond to COVID-19. Not every state has a MBDC.

What information and documentation will be required?

• Paycheck Protection Program Loan Application
• Payroll Documentation
• Lenders will also require other good faith certifications.  See the informational links above for more detail.
• What won’t be required?
• Evidence that the borrower couldn’t obtain credit elsewhere
• A personal guarantee for the loan
• Collateral for the loan

How much can you borrow?

• We recommend reviewing the informational links above speaking directly to an SBA loan provider.
• Generally, qualifying applications are eligible for loans up to 2.5x the borrower’s average monthly payroll costs, not to exceed $10 million.

We want to support the Everlance community as much as possible during these challenging times.  If you have questions or need specific assistance, please feel free to contact us at support@everlance.com

Visit our Codiv-19 Financial Resource Center for more info.