On March 27, 2020 President Trump signed the CARES Act[1]. This client alert provides a brief overview of many of the SBA[2] provisions of the CARES Act that are likely to be of benefit to our clients. 


The CARES Act Paycheck Protection Program expands the types of businesses that are eligible for SBA Loans. It also establishes a program for forgiving any portion of the loans used to pay a business’ payroll costs and similar obligations for up to 8-weeks for loans made before the end of June 2020.

Other facts about the CARES Act Paycheck Protection Program:

  • Applies to most small business with fewer than 500 employees.
  • Allows loans of up to $10 Million dollars for qualifying expenses.
  • The government will forgive an amount of the loan equal to the payments used for following during the first 8-weeks of the loan:
    • payroll costs;
    • any payment of interest on any covered mortgage;
    • any payment on any covered rent; and
    • certain utility payments.
  • Payroll costs that can be forgiven include:
    • salary, wages, commissions, tips, or similar compensation;
    • payments for vacation, parental, family, medical, or sick leave;
    • dismissal or severance allowances;
    • group healthcare payments;
    • retirement benefits; and
    • State or local tax assessed on employee compensation.
  • Borrowers must make a good faith certification that:
    • The uncertainty of current economic conditions makes the loan necessary to support ongoing operations.
    • The funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.
    • The business does not currently have another application pending for a loan under the program.
    • During the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received money from the program for the same purpose and has not received in duplicative loans.
  • Loans can have a maximum maturity of 10 years.
  • Payments can be deferred for the first 6 months.
  • Interest rates cannot be higher than 4%.
  • Loans can be used for payroll costs, group health premiums, employee salaries or similar compensation, mortgage interest payments, utilities, interest on certain kinds of other debt.
  • No personal guarantee is required.


The CARES Act expands access to the existing federal emergency injury disaster loan program. This program issues low interest loans to businesses impacted by disasters and other emergencies, and allows for a forgivable advance on such loans of up to $10,000.

Other facts about Emergency EIDL Grants

  • Expands eligible businesses to a variety of entities with fewer than 500 employees.
  • Allows businesses to apply for advances on their loans of up to $10,000.
  • These advances do not have to be repaid if used for certain expenses including:
    • providing paid sick leave to employees unable to work due to the direct effect of the COVID–19;
    • maintaining payroll to retain employees during business disruptions or substantial slowdowns;
    • meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
    • making rent or mortgage payments; and
    • repaying obligations that cannot be met due to revenue losses.


  • The SBA will cover the principal and interest payments on certain qualifying, existing loans already made under Title V of the Small Business Investment Act.

[1] Coronavirus Aid, Relief and Economic Security Act

[2] Small Business Administration


Author: Jacob Scarr

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