Business Relief Programs through CARES

The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides economic relief specifically expanding the loans available to small businesses through the Small Business Association ("SBA") affected by the COVID-19 pandemic. The following is a summary of the programs offered that employers should be aware of.

Paycheck Protection Program

  • After the first round of PPP loans were exhausted, the SBA resumed accepting Paycheck Protection Program applications from participating lenders on Monday, April 27, 2020.
  • The U.S. House of Representatives recently approved legislation to provide more flexibility for PPP Loan Forgiveness. (Learn more about the legislation here.) The Senate may soon take up the bill. We will be monitoring developments and update this page as needed.

Current Provisions
The Paycheck Protection Program (“PPP”) authorized up to $349 billion in the first round and authorizes $175 billion in the second round in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone. The loan amounts will be forgiven as long as:

  • The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
  • Employee and compensation levels are maintained.

Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. Loan payments will be deferred for 6 months.

When can I apply?

  • Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

Where can I apply?

You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit for a list of SBA lenders.

Who can apply?

All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries

For this program, the SBA’s affiliation standards are waived for small businesses (1) in the hotel and food services industries; or (2) that are franchises in the SBA’s Franchise Directory; or (3) that receive financial assistance from small business investment companies licensed by the SBA. Additional guidance may be released as appropriate.

SBA Economic Disaster Loans
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid. This additional funding expands the existing EIDL program in response to the COVID-19 pandemic for the period January 1, 2020 through December 31, 2020.

Small businesses, not-for-profit organizations, cooperatives, tribal small business concerns and ESOPs with 500 employees or less, sole proprietorships and independent contractors are eligible for EIDLs under the expanded program.

Some of the ordinary pre-requisites for these loans are waived or modified as follows:

  • Personal guarantees are not required for advances or loans of $200,000 or less.
  • Applicants need not have been in business for one-year prior to seeking an EIDL, so long as the applicant was in business on January 31, 2020.
  • Applicants do not need to certify that they are unable to obtain credit elsewhere.
  • Approval can be based solely on a credit score without the need for the applicant to submit a tax return.

Applicants can request an advance with their application, and the SBA can disburse up to $10,000 to eligible businesses within three days of the application’s receipt. That advance must be used to:

  • Provide paid sick leave to employees unable to work due to the direct effect of COVID-19;
  • Maintain payroll to retain employees during business disruptions or substantial slowdowns;
  • Meet increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
  • Make rent or mortgage payments; or
  • Repay obligations that cannot be met due to revenue losses.

Applicants will not be required to repay the amount of any advance, even if they are later denied an EIDL.

SBA Debt Relief
The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis. Under this program:

  • The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
  • The SBA will pay the principal and interest of current 7(a) loans for a period of six months.

SBA Express Bridge Loans
Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for decision and disbursement on Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.


  • Up to $25,000
  • Fast turnaround
  • Will be repaid in full or in part by proceeds from the EIDL loan

Chapter 11 Bankruptcy Relief

The CARES Act modifies the relief available under Chapter 11 of the Bankruptcy Code for certain businesses that seek to reorganize. The Code provides for a streamlined reorganization process for small businesses with aggregate debts of $2.73 million, but CARES increases that limit to $7.5 million for Chapter 11 bankruptcies commenced after March 27, 2020. Additionally, for cases commenced within one year after the enactment of the CARES Act, any federal COVID-19 relief payments are excluded from the calculation of the debtor’s monthly income.

Chapter 11 debtors with reorganization plans confirmed prior to March 27, 2020 may seek modification of those plans. These debtors must demonstrate at a hearing that they have experienced or are experiencing a material financial hardship due, directly or indirectly, to the COVID-19 pandemic. Any modification granted cannot extend the time period for payments by the debtor beyond seven years after the due date for the first payment under the original confirmed reorganization plan.

Employee Retention Credit

The CARES Act creates a refundable payroll tax credit for eligible businesses that retain/continue to pay their employees in certain circumstances.

Businesses are eligible if they carried on a trade or business during the 2020 calendar year and either of the following conditions are met:

  • Business operations were fully or partially suspended during any quarter of 2020 due to a government order relating to COVID-19; or
  • The business remained open but, during any quarter in 2020, experienced a reduction in gross receipts of at least 50%, (this eligibility ends once gross receipts exceed 80% of gross receipts for the same calendar quarter in the prior year).

For each quarter in which a business is eligible, it will receive a credit against the employer portion of the social security tax that is equal to 50% of “qualified wages,” capped at $10,000 per employee, paid after March 12, 2020 and before December 31, 2020. The definition of “qualified wages” depends on the employer’s size.

Employers that had, on average, 100 or fewer full-time employees in 2019, may claim a credit for wages (including qualified health plan expenses) paid while their operations were suspended, and in each period during which there was a “significant decline in gross receipts” as defined by the law.

Employers that had, on average, more than one hundred full-time employees in 2019, can claim a credit for wages (including qualified health plan expenses) paid to an employee who was not working/performing services (e.g., was furloughed) due to the pandemic.

The Department of the Treasury is authorized to advance the payment of this tax credit to employer. An employer will not be entitled to take advantage of this employee retention tax credit if it obtains forgiveness of a PPP loan.

Payroll Tax Deferral

Under the CARES Act, payroll taxes that would otherwise be due in 2020 are deferred such that 50% of such taxes will be due on December 31, 2021, and the remaining 50% will be on December 31, 2022. No employer will be entitled to take advantage of this payroll tax deferral if it obtains forgiveness of a PPP loan.

Modifications to Net Operating Loss Rules

The CARES Act provides that a net operating loss incurred after January 31, 2017 but before January 1, 2021 may now be carried back five years. The 80% limit on the deduction is also repealed as to both carry-forwards and carry-backs through the 2020 tax year. A separate deduction limit will apply to tax years 2021 and beyond.

Alternative Minimum Tax Credits

Under the CARES Act, AMT credits will be 100% refundable beginning in tax year 2019. The Act also creates a special election that permits businesses to take the entire refundable credit amount in 2018 by filing a refund claim before December 31, 2020. The Secretary of the Treasury must review and determine these applications, and apply or refund any overpayment, within ninety days.