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Emergency relief for small businesses under the CARES Act

On March 13, 2020, President Donald Trump declared a national emergency in the US in response to the 2019 novel coronavirus disease (COVID-19) pandemic. On March 27, 2020, President Trump enacted the Coronavirus Aid, Relief, and Economic Security ACT (CARES Act). The CARES Act provides a stimulus package to US businesses and individuals facing economic hardship caused by the COVID-19 pandemic.

On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act (PPPHCE Act) (Pub. L. No. 116-139 (H.R. 266)) was enacted to increase funding under the CARES Act.

On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 (PPPF Act) was enacted to give more time and flexibility to small businesses to retain their employees and ensure their continued operations as the country slowly reopens amidst the COVID-19 crisis.

This page highlights key provisions of the CARES Act most relevant to small businesses seeking emergency financial relief.

Useful resources

Available relief measures for small businesses

Paycheck Protection Program (PPP)

See details

Economic Injury Disaster Loan (EIDL)

See details

Emergency Economic Injury Grant

See details

Main Street Lending

See details

SBA Debt Relief

See details

Employee Retention Credit

See details

Payroll Tax Deferral

See details

Paycheck Protection Program (PPP)

Designed to encourage small businesses to retain employees through the COVID-19 crisis.

  • Designed to encourage small businesses to retain employees through the COVID-19 crisis.

    PPP is an expansion of the Small Business Administration's (SBA) 7(a) loan program which typically has a limit of $5 million in SBA guaranteed loans. PPP provides up to $659 billion in forgivable loans to small businesses to cover payroll and certain other operational costs from February 15, 2020 through December 31, 2020.

    On April 24, 2020, $60 billion of PPP funding was set aside for community banks and smaller lenders, with $30 billion allocated to banks with $10 to $50 billion in assets and the remaining $30 billion to banks with less than $10 billion in assets.

    Maximum Loan: Lesser of $10 million or 2.5x borrower's average monthly payroll during one-year period before date of loan. PPP sets a cap on salaries of $100,000.

    Up to 100% debt forgiveness if both:

    • 60% of the loan proceeds are used to cover payroll costs over the covered period. The covered period begins on the date the loan is made and runs for a 24-week period or through December 31, 2020, whichever comes sooner.
    • Employee and compensation levels are maintained.

    Not more than 40% of the forgiven amount may be for non-payroll costs (for example, mortgage interest, rent, and utilities).

    Loan forgiveness will be reduced if the business:

    • Reduces its full-time employee headcount.
    • Decreases salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

    Any loan amounts forgiven under the PPP will not be treated as taxable income (meaning, the amount will not be considered taxable cancellation of indebtedness income).

    Businesses have until December 31, 2020 to restore their full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

  • Businesses with 500 or fewer employees that were operational on February 15, 2020.

    Businesses include sole proprietors, independent contractors, non-profits, and other self-employed individuals.

    Loan eligibility is not based on the ability to repay.

    Borrowers must make a good faith showing that the current economic uncertainty makes their loan request necessary to support their ongoing business operations.

  • If receiving PPP loan, ineligible for Employee Retention Credit.

    Ineligible for Payroll Tax Deferral as of date of PPP forgiveness.

    Cannot use funds for same expenses as other SBA loans.

  • Borrower submits to an approved lender:

    • 4 page application SBA Form 2483
    • Payroll documentation sufficient to demonstrate payroll amount.

Economic Injury Disaster Loan (EIDL)

Designed to provide working capital loans to small businesses suffering substantial economic injury from COVID-19 crisis.

  • EIDL is an expansion of the existing Economic Injury Disaster Loan Program (EIDLP).

    Provides up to $60 billion in low interest loans to small businesses to pay:

    • Fixed debts
    • Payroll
    • Accounts payable
    • Rent
    • Utilities
    • Other bills that cannot be paid because of the disaster's impact

    Maximum Loan: Up to $2 million, based on borrower's actual economic injury and financial need.

    Debt Forgiveness: None.

    Program Period: January 31, 2020 through December 31, 2020.

  • Businesses with 500 or fewer employees or that meet the applicable SBA industry size standards that:

    • Were in operation on January 31, 2020
    • Suffered a "substantial economic injury," defined as an inability to meet its financial obligations, pay ordinary and necessary operating expenses, or has a reduction in working capital resulting from the COVID-19 crisis

    Businesses include sole proprietors, independent contractors, non-profits, and other self-employed individuals.

  • Cannot be used for the same expenses as PPP.

    EIDL received after January 31, 2020 and through the date of a PPP can be rolled into PPP, if intended for same purpose.

  • Provide the required information on the U.S. Small Business Administration website to see if you’re eligible for an economic injury loan.

    On June 15, 2020, the SBA reopened the EIDL and EIDL Advance Program portal to accept new loan applications from eligible borrowers.

    See application

Emergency Economic Injury Grant (EEIG) or EIDL Advance

A loan advance on an EIDL to provide immediate economic relief to businesses that are currently experiencing a temporary loss of revenue.

  • Loan advance does not have to be repaid.

    Maximum Amount: $10,000.

    EEIG may also be referred to as an Economic Injury Disaster Loan Grant, EIDL grant, or an EIDL Advance.

    Employers request an EEIG when filling out their EIDL application.

  • Same as EIDL.

    Must apply for an EIDL.

  • Cannot be used for the same purpose as PPP.

    EEIG received after January 31, 2020 and through the date of a PPP can be rolled into PPP, if intended for same purpose.

  • On June 15, 2020, the SBA reopened the EIDL and EIDL Advance Program portal to accept new loan applications from eligible borrowers.

    See application

SBA Debt Relief

Provides SBA borrowers with six months of relief from payments of principal, interest, and fees on certain SBA loans.

  • Permits banks to extend the duration of existing loan terms.

    Provides an extension on certain reporting requirements.

  • Existing SBA 7(a), 504 or micro loans, and new loans issued before September 27, 2020.

  • Does not apply to PPP or EIDL loans.

  • No application required.

    Borrowers should contact their lender with questions.

Employee Retention Credit

Incentivizes eligible employers impacted by the COVID-19 outbreak to keep employees on their payroll.

  • Eligible employers may claim as a credit against employment taxes an amount equal to 50% of up to $10,000 in qualified wages paid for each employee after March 12, 2020, and before January 1, 2021 (meaning up to $5,000 per employee).

    Certain health plan expenses can be allocated and treated as qualified wages when computing the credit.

    The credit is fully refundable.

    Employers may claim the credit by:

    • Claiming the credit on IRS Form 941
    • Reducing their federal employment tax deposits by the amount of the credit
    • Submitting Form 7200 (Advance Payment of Employer Credits Due to COVID-19) to request advance payment of the credit

  • An employer is eligible for the employee retention credit if it carries on a trade or business during 2020 that either:

    • Fully or partially suspends operation during any quarter in 2020 because of an order from a governmental authority restricting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19.
    • Experiences a significant decline in gross receipts during a quarter. A significant decline in gross receipts begins with the first quarter in which an employer's gross receipts for a calendar quarter in 2020 are less than 50 percent of its gross receipts for the same calendar quarter in 2019.

    Employers with more than 100 employees can claim the credit only for wages paid to furloughed employees or employees who had reduced hours, for services not rendered.

    Employers with fewer than 100 employees can claim the credit on all wages paid, regardless of whether employees provided services.

    Although tax-exempt organizations are eligible for the credit, state and local governments are not.

    Self-employed individuals are also not eligible for the credit as to their self-employment services and earnings.

  • Ineligible if receiving a PPP loan, even if the employer does not receive forgiveness of all or a part of that loan.

    Ineligible if employer received a credit for qualified leave wages under the Families First Coronavirus Response Act (FFCRA) regarding the same wages.

Employee Retention Credit Tool

Business people using pen,tablet,notebook and laptop are planning a marketing plan to improve the quality of their sales in the future.

Quickly and accurately advise your business clients on relief options. The Employee Retention Credit Tool helps to determine if your business clients may qualify for the credit and otherwise do not qualify for or will not take a PPP loan. Or share the link with your business clients for them to use.

Learn more

Payroll Tax Deferral

Helps employers and self-employed individuals in the face of economic hardship related to the COVID-19 crisis.

  • Deferral of employer share of 6.2% social security tax or half of self-employment tax.

    Applies to payments during the period March 27, 2020 to December 31, 2020.

    Instead of depositing these taxes on a next-day or semi-weekly basis:

    • The deposit due date for 50% of the taxes is deferred to December 31, 2021
    • The remaining 50% is deferred until December 31, 2022

  • Payroll tax deferral is available to all employers with no size restriction.

    Self-employed individuals and tax-exempt organizations are eligible.

  • Employers who have received a PPP loan and are having their loans forgiven can defer eligible payroll tax payments for the entire period of March 27, 2020 to December 31, 2020.

    Employers can defer payroll tax before determining:

    • Whether the employer is entitled to the paid leave credits under the FFCRA or the employee retention credit under the CARES Act; and
    • The amount of employment tax deposits that it may retain in anticipation of these credits, the amount of any advance payments of these credits, or the amount of any refunds with respect to these credits.

Last Updated: 6/23/2020

Additional resources

This page was created by Thomson Reuters legal and tax experts to assist your small business. For further in-depth coverage, access free COVID materials via the following Thomson Reuters platforms.

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