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What the CARES Act Economic Aid Package Means for Small Business Owners

The coronavirus economic relief package (H.R. 748) is now signed into law as the largest economic relief package in United States history.

The $2.2 trillion relief package includes $377 billion for small business loans and grants. The bill also allocates $17 billion for deferring payments on small business loans and $10 billion in small business emergency grants.


The law titled “Coronavirus Aid, Relief, and Economic Security Act or the CARES Act is meant to entitle “An Act to amend the Internal Revenue Code of 1986 to repeal the excise tax on high cost employer-sponsored health coverage.”

The CARES Act focuses on economic security through corporate, small business and individual loans and grants. Originally introduced on an unrelated manner, on March 25, 2020 the Senate replaced its text in whole with the stimulus bill.

The law gives $10 billion for grants up to $10,000 for emergency immediate operating costs for small businesses. There is $350 billion for the Small Business Administration to issue loans up to $10 million per business and $17 billion to cover six months of payments for small businesses already using SBA loans.

These funds can be used in any way for payroll, mortgage, rent, and existing debt forgiveness as long as employees are working through the end of June.

Source: Estimates for third relief bill based on bill text, committee and administration numbers.
Credit: Audrey Carlsen/NPR

Who Qualifies

Business owners with under 500 employees, sole proprietors, independent contractors and the self-employed may apply for the loan and grant money if they are in an eligible disaster area. Payroll businesses will be eligible for assistance with rent, mortgage interests and utilities.

The U.S. Treasury Department can release up to $500 billion in loans to companies of all sizes. The loans have stipulations to prohibit stock buy-backs, limit executive paychecks and enforce the retainment of 90 percent of employees through September 30.

The loans have a 5-year limit to be paid back and businesses that enroll for the package must not issue dividends for up to a year after the loan is no longer outstanding.

Business owners can sign up for emergency assistance on the SBA website. There is no turnaround time quoted for how long these loans and grants take to process.

3-step Loan Process fom SBA.Gov

Eligible Small Business Relief Concerns

Small businesses are addressed under Division A Title 1 – “Keeping American Workers Paid and Employed Act” in Sec. 1103. Entrepreneurial development. Small businesses can use the loans and grants to solve concerns defined by H.R. 748.

The Small Business Administration (SBA) states on their website, ” 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.”

Businesses may apply for the grants and loans that fall under the concerns below listed as a result from covid-19.

  • Supply chain disruptions
  • Staffing challenges
  • Loss of customers
  • Closure
Statement from the U.S. Small Business Administration


The CARES Act addresses business mortgages and payroll under Sec. 1106. Loan forgiveness. Businesses that incur regular monthly charges for a work space and payroll employees can apply for mortgage loan forgiveness.

Mortgage Loan Forgiveness

  • Covered mortgage obligation must have been before February, 15, 2020
  • Covered rent obligation must have been a leasing agreement in force before February 15, 2020
  • The expected forgiveness amount will be the amount of principal that a lender reasonably expects a borrower to expend during the covered period on the sum of any payroll costs, utilities or rent obligation

Short Term Compensation Loans

The U.S. Treasury Department is working with banks to give loans to businesses struggling to meet their payroll, resources, production and rent.

These short term compensation loans require business owners to pay back one-half of the amount of the loan under the compensation plan.

According to Al Jazeera ” To encourage the distribution of these loans, banks would earn a 5 percent fee for making the loans. Payments can be deferred up to a year, and the loans could be partially forgiven if the money is used to pay employee salaries, rent, mortgage interest or utilities.”

Business Provisions

The CARES Act has business provisions meant to subsidize loans and grants to encourage economic stimulation and job security. Main provisions include the employee retention credit, delayment of employer payroll taxes and net operating loss modifications.

AP News reported, “The package includes $50 billion in tax credits for businesses that keep employees on payroll and will cover 50% of those workers’ paychecks. Companies can also defer payment of the 6.2% Social Security tax, giving them an incentive to put off layoffs at a time when ordinary business has come to a halt.”

Retention Credit

Sec. 2301. Employee retention credit for employers subject to closure due to COVID–19. Employers will be given a credit against employment taxes for each calendar quarter in an amount equal to 50% of qualified wages for each employee.

This applies to wages paid after March 12, 2020, and before January 1, 2021. The amount may not exceed $10,000 for all calendar quarters.

Delay Payroll Taxes

Sec. 2302. Delay of payment of employer payroll taxes. The payroll tax deferral period exempts employers from payments while the (undetermined) period lasts. 50 percent of the taxes will not be treated as taxes and in general the payment for 50 percent of the taxes shall not be due before the applicable date.

The CARES Act is one of many government aids being pushed out during the covid-19 pandemic. CARES Act is heavily aimed towards business economic stimulus while other aids have centered on individuals.

Precursing the CARES Act are the Worker Relief Act, Families First Coronavirus Response Act and Supporting Students in Response to Coronavirus Act.

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What the CARES Act Economic Aid Package Means for Small Business Owners