How to Apply for a Coronavirus Small Business Loan Under the CARES Act

By Dan Doherty

Where to Apply for Coronavirus Loans for Small Businesses

Small businesses continue to feel the impact of economic disruption due to the coronavirus (COVID-19) outbreak. On March 27, 2020 the Federal Government signed into law the CARES Act which authorized $376 billion in coronavirus loans for small businesses through the Paycheck Protection Program (PPP). The program was supplemented with $320 billion in new funding on April 24, 2020.

The U.S. Small Business Administration (SBA) will offer low-interest Coronavirus small business loans through their disaster loans program.

In addition to traditional Small Business Administration (SBA) funding programs, the CARES Act established several new temporary lending programs to address the COVID-19 outbreak.

The Paycheck Protection Program (PPP) allows small businesses to apply for loans of up to $10 million, with potential loan forgiveness. PPP loans are provided by lenders such as banks and credit unions.

In this article, we’ll walk you through how to apply for coronavirus loans under the Paycheck Protection Program of the CARES Act. We’ll help you understand if your small business is eligible for these loans, and provide resources to help you find qualified lenders.

For more information on coronavirus loan resources, visit the SBA’s Small Business Guidance & Loan Resources page.

The Families First Coronavirus Response Act: What it Means for You and Your Employees (eBook)

Learn everything your business needs to know about the Families First Coronavirus Response Act, which requires certain employers to provide paid sick leave or expanded family and medical leave as well as expanded unemployment benefits related to COVID-19.

Download Free eBook

 

Paycheck Protection Program Loans Under the CARES Act

Coronavirus loans through the SBA's Paycheck Protection Program (PPP) provide incentives to small businesses to keep employees on their payroll.

The CARES Act offers Paycheck Protection Program loans for up to $10 million for small businesses affected by the coronavirus pandemic.

This loan program provides incentives for your company to keep employees on your payroll by providing loan forgiveness if you use these loans to retain employees.

How to Apply for Coronavirus Loans Under the Paycheck Protection Program

Click image to view the application form for the Paycheck Protection Program loans on the SBA website.
Click to view the application form for Paycheck Protection Program loans on the SBA website.

To begin preparing your application for Paycheck Protection Program loans, you can download a copy of the PPP borrower application form from the SBA website to see the information that will be requested from you when you apply with a lender.

You’ll need to apply for PPP loans through qualified lenders such as banks and credit unions.

Looking for a lender? Check out the full list of PPP lenders in Forbes.

Some small businesses are reporting issues finding lenders who will issue Paycheck Protection Program loans. Due to the high volume of inquiries many lenders are giving priority to existing customers.

To avoid any complications, it may be easier to apply for your Paycheck Protection Program loan through a financial institution that you have an existing relationship with.

Update as of April 24, 2020: The SBA had stopped accepting new PPP loan applications on April 16, 2020 after initial funding ran out. The program was given an additional $320 billion in new funding on Friday, April 24. The new loan funding package set aside $60 billion to be disbursed by small lenders.

How to Calculate Loan Amounts

Wondering how much money your small business is eligible to borrow for under the Paycheck Protection Program?

Check out this PDF from the tresury.gov website that was updated on April 24, 2020:

How to Calculate Maximum Loan Amounts (PDF)

Who Can Apply for Coronavirus Loans Under the Paycheck Protection Program?

Who can apply for Coronavirus Loans under the Paycheck Protection Program.

The following small businesses affected by coronavirus (COVID-19) may be eligible for Paycheck Protection Program loans:

  • 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 (click here for additional detail)
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

Paycheck Protection Program Loan Details and Loan Forgiveness

Paycheck Protection Program loans offer forgiveness if your business maintains payroll for 8 weeks at employees' normal salaries and you use the loan proceeds for qualified expenses.

Coronavirus loans under the Paycheck Protection Program offer potential loan forgiveness if your business maintains payroll for 8 weeks at employees’ normal salaries and you use the loan proceeds for qualified expenses.

Loan forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.  Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

On May 15, 2020, the U.S. Treasury and SBA released the PPP Loan Forgiveness Application and instructions to provide structure and guidance around the statutory loan forgiveness standards of the CARES Act, including:

  • The “Alternative Payroll Covered Period” which allows employers to start their 8-week calculation period at the start of the first pay period after loan disbursement
  • A salary reduction worksheet, with a standard Q1 2020 look-back period, and distinct calculations for hourly and salary employees
  • A worksheet to exclude employees who were terminated for cause or refused to return to work upon rehire from full-time employee reduction calculations

Paycheck Program Program loans have a maturity of 2 years and an interest rate of 1%. These loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. At least 75% of the forgiven amount must have been used for payroll.

Loan payments will also be deferred for six months, with no collateral or personal guarantees required. Neither the government nor lenders will charge small businesses any fees to get coronavirus loans under the Paycheck Protection loan program.

Other Coronavirus loan options through the U.S. Small Business Administration (SBA).

Other CARES Act Loan Program Options for Your Business

In addition to the Paycheck Protection Program loans described above, the CARES Act established several other temporary programs for coronavirus loans aimed to help your small business address the COVID-19 outbreak.

Economic Injury Disaster Loan (EIDL) Loan Advance: this loan advance program will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties. Learn more

SBA Express Bridge Loans: these bridge loans enable small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. Learn more

SBA Debt Relief: the SBA has a debt relief program that provides a financial reprieve to small businesses during the coronavirus pandemic. Learn more

Additional Coronavirus Loan Resources

Additional resources on coronavirus small business loans:

The Families First Coronavirus Response Act: What it Means for You and Your Employees (eBook)

Learn everything your business needs to know about the Families First Coronavirus Response Act, which requires certain employers to provide paid sick leave or expanded family and medical leave as well as expanded unemployment benefits related to COVID-19.

Download Free eBook