(Infor­ma­tion accu­rate as of 03/30/20)


The Coro­n­avirus Aid, Relief, and Eco­nom­ic Secu­ri­ty Act (“CARES Act”), signed into law on Fri­day March 27, 2020, intro­duces the Pay­check Pro­tec­tion Pro­gram (the “PPP”) with $349 bil­lion in fund­ing and the goal of pre­vent­ing job loss and small busi­ness­es fail­ure due to loss­es caused by the COVID-19 pan­dem­ic.  The new PPP loan pro­gram is avail­able for eli­gi­ble small busi­ness­es, includ­ing sole pro­pri­etors, and non-prof­its, vet­er­ans orga­ni­za­tions and trib­al busi­ness con­cerns, to pro­vide a for­giv­able loan to cov­er pay­roll and oth­er costs.  Addi­tion­al­ly, the CARES Act great­ly expands the Eco­nom­ic Injury Dis­as­ter Loan Pro­gram (the “EIDL” Pro­gram) with $10 bil­lion of addi­tion­al fund­ing for the SBA.

Busi­ness­es need to under­stand both pro­grams as well as the addi­tion­al finan­cial and oth­er relief that may be avail­able under the CARES Act in order to make short- and long-term plan­ning deci­sions.  The CARES Act pro­vides assis­tance to many busi­ness­es that may not meet the cus­tom­ary small busi­ness thresh­olds.  Giv­en the var­i­ous qual­i­fi­ca­tion cri­te­ria, the pro­grams and incen­tives enact­ed under the CARES Act must be eval­u­at­ed sep­a­rate­ly for each busi­ness, con­sid­er­ing indus­try, legal require­ments and finan­cial and oth­er con­trac­tu­al com­mit­ments dur­ing this chal­leng­ing time.

Pay­check Pro­tec­tion Pro­gram (“PPP”)

PPP loans are 100% fed­er­al­ly guar­an­teed loans for small busi­ness­es intend­ed for com­pa­nies to main­tain their pay­roll lev­els and allow par­tial loan for­give­ness, as described below.  The loans are avail­able until June 30, 2020 for eli­gi­ble com­pa­nies to cov­er the cost of:

  • Pay­roll
  • Health care ben­e­fits and relat­ed insur­ance premiums
  • Employ­ee com­pen­sa­tion (with some lim­i­ta­tions for employ­ees with salaries over $100,000 and exclu­sions for employ­ees based out­side the U.S.)
  • Mort­gage inter­est oblig­a­tions (but not principal)
  • Rent and utilities
  • Inter­est on debt incurred pri­or to the loan

The max­i­mum amount of a PPP loan avail­able to each bor­row­er is equal to the less­er of: (a) $10 mil­lion, or (b) 2.5 x its aver­age total month­ly pay­roll costs, as defined in the Act.  Unlike most typ­i­cal SBA loans, the PPP Loans are unse­cured loans requir­ing no col­lat­er­al, no per­son­al guar­an­tee, and no show­ing that cred­it is unavail­able else­where.  The PPP loan, to the extent not for­giv­en, has a max­i­mum 10-year term and the inter­est rate may not exceed 4%.  PPP loans will be made avail­able through SBA-approved lenders, who must offer a 6–12 month defer­ment on pay­ment of prin­ci­pal, inter­est, and fees.

PPP loans are eli­gi­ble for loan for­give­ness for amounts spent dur­ing the 8‑week peri­od after the orig­i­na­tion date, sub­ject to prop­er documentation

To be eli­gi­ble for a PPP loan, a com­pa­ny must be either (i) a small busi­ness con­cern under the SBA reg­u­la­tions, or (ii) a busi­ness con­cern, non­prof­it orga­ni­za­tion, vet­er­ans’ orga­ni­za­tion, or Trib­al busi­ness con­cern that employs not more than 500 employ­ees or the num­ber of employ­ees in the size stan­dard applic­a­ble to the borrower’s indus­try, which for some indus­tries is up to 1500 employees.

Eli­gi­ble com­pa­nies must have been in oper­a­tion on Feb­ru­ary 15, 2020 and must have, as of that date, had employ­ees for whom the enti­ty paid salaries and pay­roll tax­es, or paid inde­pen­dent con­trac­tors. Addi­tion­al­ly, when apply­ing for a PPP loan, a bor­row­er must cer­ti­fy that the uncer­tain­ty of cur­rent eco­nom­ic con­di­tions makes nec­es­sary the loan request to sup­port the ongo­ing oper­a­tions of the eli­gi­ble recip­i­ent and acknowl­edge that the funds will be used to retain work­ers and main­tain pay­roll or make mort­gage pay­ments, lease pay­ments, and util­i­ty payments.

Eco­nom­ic Injury Dis­as­ter Loan (“EIDL”) Program

Anoth­er option for small busi­ness­es is the SBA’s exist­ing EIDL Pro­gram, which was expand­ed by the CARES Act and pro­vides for longer-term loans with favor­able bor­row­ing terms.  Com­pa­nies in all 50 states, Dis­trict of Colum­bia, and some U.S. ter­ri­to­ries are eli­gi­ble for EDIL loans relat­ing to eco­nom­ic injury caused by the COVID-19 pan­dem­ic.  While there are no loan for­give­ness pro­vi­sions applic­a­ble to EIDL loans, com­pa­nies that have already applied for or received EIDLs due to eco­nom­ic injury attrib­ut­able to the COVID-19 pan­dem­ic can seek to refi­nance their EIDL loans under the PPP to take advan­tage of the PPP’s loan for­give­ness pro­vi­sions.  Addi­tion­al­ly, while com­pa­nies may be eli­gi­ble for loans under both pro­grams, they are unable to seek recov­ery under the EIDL loan for the same costs that are cov­ered by a PPP loan.

To qual­i­fy for an EIDL under the CARES Act, the appli­cant must have suf­fered “sub­stan­tial eco­nom­ic injury” from COVID-19.  EIDL loans under the CARES Act are based on a company’s actu­al eco­nom­ic injury deter­mined by the SBA (less any recov­er­ies such as insur­ance pro­ceeds) up to $2 mil­lion.  EIDL loans may be used for pay­roll and oth­er costs as well as to cov­er increased costs due to sup­ply chain inter­rup­tion, to pay oblig­a­tions that can­not be met due to rev­enue loss and for oth­er uses.  The inter­est rate on EIDL loans is 3.75% fixed for small busi­ness­es and 2.75% for non­prof­its.  The EIDL loans have up to a 30-year term and amor­ti­za­tion (deter­mined on a case-by-case basis).

EIDLs under the CARES Act do not require per­son­al guar­an­tees for loans up to $200,000, but do require per­son­al guar­an­tees by own­ers of more the 20% of the bor­row­er for loans in excess of that amount.  The CARES Act waives the require­ment for the bor­row­er to demon­strate that it is unable to obtain cred­it else­where.  How­ev­er, unless changed by the SBA, it appears that the require­ment for col­lat­er­al on EIDL loans over $25,000 would still apply, and, in pro­cess­ing a borrower’s appli­ca­tion, the SBA must make a deter­mi­na­tion that the appli­cant has the abil­i­ty to repay the loan.  Fur­ther, the SBA can approve a loan based sole­ly on the cred­it score of the appli­cant or oth­er means of deter­min­ing the applicant’s abil­i­ty to repay the loan, with­out requir­ing the sub­mis­sion of tax returns, which should expe­dite approval of EIDLs dur­ing the cov­ered period.

The CARES Act also per­mits appli­cants to request an advance of up to $10,000 to pay allow­able work­ing cap­i­tal needs; the advance is expect­ed to be paid by the SBA with­in 3 days.  This advance is essen­tial­ly a grant and is not required to be repaid, even if the appli­ca­tion is denied, but the amount of the advance must be deduct­ed from any loan for­give­ness amounts under a PPP loan, described above.

Giv­en the very favor­able terms of these two SBA loan pro­grams and the poten­tial for loan for­give­ness under PPP loans, eli­gi­ble small busi­ness­es who have been eco­nom­i­cal­ly impact­ed by the COVID-19 pan­dem­ic should strong­ly con­sid­er tak­ing advan­tage of these loan pro­grams.  Appli­ca­tions for EIDL loans should be sub­mit­ted direct­ly to the SBA, while PPP loans will be avail­able from SBA-approved lenders.



  • COVID-19 / CARES Webinars

NKY Cham­ber of Com­merce is host­ing a pan­el-led webi­nar on Mon­day March 30th and Tues­day March 31st.  To reg­is­ter go to:https://northernkentuckykycoc.wliinc14.com/events/Understanding-the-CARES-Federal-Stimulus-Webinar-Series-3472/details

Client Inquiry Responses:

  • Employ­ee Reten­tion Cred­it for Employ­ers Sub­ject to Clo­sure Due to COVID-19 –The pro­vi­sion would pro­vide a refund­able pay­roll tax cred­it for 50 per­cent of wages paid by employ­ers to employ­ees dur­ing the COVID-19 cri­sis. The cred­it would be ava­ial­ble to employ­ers whose (1) oper­a­tions were ful­ly or par­tial­ly sus­pend­ed, due to a COVID-19-relat­ed shut-down order, or (2) gross receipts declined by more than 50 per­cent when com­pared to the same quar­ter in the pri­or year.  It’s impor­tant to note that if the employ­er is tak­ing a small busi­ness inter­rup­tion loan (more to come on that short­ly), they are not eli­gi­ble for this cred­it. 
  • The cred­it is based on qual­i­fied wages paid to the employ­ee. For employ­ers with greater than 100 full-time employ­ees, qual­i­fied wages are wages paid to employ­ees when they are not pro­vid­ing ser­vices due to the COVID-19-relat­ed cir­cum­stances described above. For eli­gi­ble employ­ers with 100 or few­er full-time employ­ees, all employ­ee wages qual­i­fy for the cred­it, whether the employ­er is open for busi­ness or sub­ject to a shut-down order. The cred­it is pro­vid­ed for the first $10,000 of com­pen­sa­tion, includ­ing an allo­ca­ble share of health plan expens­es, paid to an eli­gi­ble employ­ee. The cred­it is pro­vid­ed for wages paid or incurred from March 13, 2020 through Decem­ber 31, 2020.

Cor­po­rate Small Busi­ness COVID-19 relief efforts:

Busi­ness­es of all sizes and sec­tors are step­ping up to address this cri­sis.  The US Cham­ber of Com­merce has pub­lished a list of Cor­po­ra­tions that are offer­ing relief assis­tance in var­i­ous forms.

  • View our cor­po­rate aid track­erfor details on how busi­ness­es of all sizes and sec­tors are step­ping up to com­bat the coro­n­avirus. Cor­po­rate dona­tions, both cash and in-kind, to sup­port med­ical pro­fes­sion­als and non-prof­its cur­rent­ly exceed $418 million.


NKY Cham­ber Dai­ly Update: http://www.nkychamber.com/news/covid-19/