Should You Get A CARES Act Loan?
UPDATE: As of April 10, 2020, sole proprietors, independent contractors, and self-employed can apply for Paycheck Protection Program Assistance.
The U.S. federal government announced on Friday, March 27, 2020 that they were offering $349 billion in loans and support to small businesses under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. And as of April 8th, there are indications that they are going to increase this amount.
While this is good news for the small businesses suffering from the impact of the Coronavirus, one week in, our latest poll finds that two-thirds of small business owners have yet to apply.
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And for those who have applied, most are still awaiting a response or struggling to find a bank who can process their application.
Coronavirus Relief FAQ
But if you qualify these funds could really make a difference. So we pulled together these resources to help you make an informed decision.
Where can I find out about the different government resources available?
- For U.S Businesses: The Coronavirus Relief Options from the SBA is hands down the best resource.
- For Canadian Businesses: You can find a variety of resources on Canada's COVID-19 Economic Response Plan for businesses
- Our friend Kevin Lang from Monarch Messenger Services Ltd shared a few I missed. Great to have friends in Calgary!
In the U.S. what federal government resources are available to me?
- Payment Protection Program: PPP provides assistance to companies who retain their employees. You can apply through approved financial institutions (we touch on that more below).
- EIDL $10K Loan Advance: This is a fast track loan from the SBA for any business.
- SBA $25K Express Bridge Loan: This is a fast track loan for businesses with relationships with existing SBA lenders.
- Economic Disaster Relief Loan: This SBA-provided option is based on regions in the country where governors have requested and received approval from the federal government.
- SBA Debt Relief: This option is for businesses with existing SBA guaranteed loans.
Can sole proprietors get assistance?
- The CARES Act does include assistance for sole proprietors, but the calculation is based on “wage, commission, income, net earnings from self-employment or similar compensation,” up to $100,000.
- The best place to start is with your accountant to figure out what amounts you can claim.
What should I do to make sure my loan gets forgiven?
This is one of the major concerns you’ve mentioned in our polls—Can I trust the government will actually forgive Payment Protection Program loans?
We certainly don’t have a crystal ball here, but experts are suggesting you establish a separate bank account for loan proceeds. Use this account only for the expenses permitted under the program so you can demonstrate exactly where you spent the money.
Experts also recommend that you review your application with your accountant and lawyer to make sure you fully understand the assertions you are making with regard to your need and use of the proceeds.
Essential Steps Before Applying for CARES Act Support
Before you apply for CARES Act loans, here are a few steps to be sure you're ready.
Step 1: Read up on the CARES Act Now
Our first recommendation is to get as informed on the act as possible. The U.S. Senate Committee on Small Business and Entrepreneurship put together this detailed report which has some great FAQs.
The SBA site has now been updated with all kinds of useful information and the best place to start is on this page.
Step 2: Talk to Your Banker First
Make sure that you are talking to a bank or someone with whom you have a financial relationship.
After you understand the CARES Act in greater detail and what it might mean for your small business, the next step is to talk to your banker or financial institution. You can ask them if they’re participating in the Paycheck Protection Program and what you should do next.
Your existing relationship with them might streamline the process for applying to and thus accessing funds and ensures that you’re dealing with a legitimate lender, as opposed to scammers (who are everywhere now).
"Make sure that you are talking to a bank or someone with whom you have a financial relationship," suggests Karen Mills, former chief of the SBA, in a conversation we had with her.
"This is not the time to go through a broker or some other conduit. It really is the time to make sure that you have direct access into these pipelines that are going to be made through credible financial institutions.”
Step 3: If You Don’t Have a Banker, Here’s How to Find One
If you don’t have a pre-existing relationship with a bank, now is the time to build one. The best way to do this is to look for an SBA lender in your area.
The SBA has a list of approved providers for the Paycheck Protection Program in each state and will continue to share more information on credited lenders as they have it.
If you're an Alignable member, you also can find a highly-recommended SBA lender in your area right on the platform. Reach out today!
Make sure you validate credentials before sharing any financial information with someone you don't already have a relationship with.
Step 4: Are There Online Lending Alternatives?
If you don’t have a relationship with your local or national bank, there are online resources you can try.
One of these is Kabbage, an online lender based in Atlanta, GA, who has established a gateway with the SBA enabling small businesses to apply directly through them.
In just a few days, they have already processed over 37,000 applications totaling $3.5 billion in loans. According to a spokesperson there, they are waiting on the funds from the government, but hopeful they’ll be starting to distribute these funds this week.
Step 5: Closing Thoughts
While we don’t know exactly what will happen next in terms of timelines, Karen Mills talked to us about general expectations based on her previous experience with the SBA. Watch the interview for her insight.
We’re sharing all of our poll results with national media to keep the impact on small businesses front and center on their minds and in their coverage. You can see some of their articles on Alignable Press.
And, if you have a few minutes, we invite you to take our Impact Poll to share your perspective.
We’ll Keep You Posted
We know this is a confusing time, and we want to help you by sharing the best resources, insight from our community of 4.5+ million small business owners, and guidance from experts like Karen. As soon as we know more, we’ll pass it along to you.
Check back in soon for more information on the CARES Act and other pressing information your small business needs to keep the doors open.
Are you applying or have you applied for the CARES Act loans? Tell us about the process in the comments below.
Related content: Find ways to access the money you need in our Coronavirus Resource Center
Comments (1-10)
Be careful about taking loans, and don't take one if you don't need it. Most or at least some of this money must be repaid, and you don't want to get into a debt problem where you didn't need the money in the first place. For example, the SBA told me that the $10,000 upfront money for an Economic Injury Disaster Loan does not need to be repaid, but the rest of the loan does.
How To Apply for an SBA COVID-19 $10,000 Disaster Grant in 10 Minutes - No Repayment Required
The SBA just simplified the application process so advisory firms can apply for a COVID-19 disaster relief loan in less than 10 minutes.
On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act provides economic relief for businesses experiencing a temporary revenue loss due to COVID-19.
This is a step-by-step breakdown of how to apply for an Economic Injury Disaster Loan from the Small Business Administration.
How to Apply for an SBA Economic Injury Disaster Loan:
Step 1: Visit the SBA disaster loan website.
Here is the direct link to begin the loan application process: https://covid19relief.sba.gov/#/.
Note: Before entering any personal information, be sure you are on the real Small Business Association site at SBA.gov.
Step 2: Verify eligibility.
The SBA is relying on businesses to self-certify eligibility. This is a two-part verification process:
The first part certifies that your business falls within the parameters of the Economic Injury Disaster Loan (EIDL) Program. Choose the one description that fits your business.
In the second part, you must certify that your business is not engaged in certain disqualifying activities. Review and check each of the boxes before continuing.
Then click the “Continue” button to be taken to the online application.
Step 3: Provide business information.
To complete this step of the online application, you will need several pieces of information pertaining to your business handy, including:
The legal and trade names of your business.
Your Federal EIN number or Social Security number.
Gross revenue and cost of goods sold for the 12 months leading up to January 31, 2020.
The date your business was founded.
The number of employees.
Step 4: Provide business owner(s) information.
At the top of this second page of the application is a question about whether your business is owned by another business entity. If the answer is yes, you will need to provide information about that entity and that entity must sign a loan guarantee.
Regardless of your answer to the first question, you will be asked for information about the owner(s) of the company. There is a separate page for each owner, and the following information per owner is required:
Percentage of business ownership.
Home address.
Phone number.
Social security number.
Date and place of birth.
Citizenship status.
Note: That first question at the top is easy to miss. If you’ve filled out all of the lines and can’t go forward, make sure you’ve answered yes or no to that qualifier at the top of the page.
Step 5: Additional information.
This page of the application is broken into sections.
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The first section requires answers to questions about criminal history or previous issues regarding dealings with the federal government.
The second section applies to anyone who may have assisted with the filing of the application (paid or unpaid). Fill in the name and contact info of anyone who assisted with your loan application. The SBA also asks for permission to contact the loan preparer.
Before entering the final information, you will be asked if you would like to be considered for a $10,000 advance on your loan. This is the $10,000 grant that is mentioned in the CARES Act. Businesses who request this $10,000 advance on their loan (which is being called a grant) and are approved are expected to receive it within three days. This $10,000 advance does not need to be paid back — though the rest of your disaster assistance loan will need to be paid back.
Important note: If you’re looking for more information on the Payroll Protection Loans — which can be converted into grants and, thus, do not need to be paid back –—read our story here. This SBA Economic Injury Disaster Loan does need to be paid back, minus the $10,000 emergency grant portion.
The last section asks for your bank information where your loan funds and the $10,000 advance, if approved, should be deposited. Once again, be sure you are on the correct site before you enter any banking information. The correct site is: https://covid19relief.sba.gov/#.
Read the provisions, which state, in part, that additional information may be required, that no one was paid for preferential treatment and that the information provided was truthful. You can read the terms and conditions of the loan here.
Clicking “Next” will take you to a summary page. Before you do so, check once again to make sure you are on the correct, secure SBA site. There is an OMB control number in the top right corner of the form. Write that number down and save it.
If you have questions about the application, you can call customer service at 1-xxx-xxx-xxxx or send an email to [email address].
Dana Gibson, Certified Financial Fiduciary
Thank you Chelsey Taylor for the article on help for Small Businesses. Most banks are NOT an SBA approved Lender so that is why there is misconception you can run to your local bank for assistance.
I have been a Small Business Consultant and Real Estate Pro since 2007. I have helped clients in the Commercial world of Real Estate to assist clients in acquiring funding through SBA and other loan products to meet the needs of the client. It could be a start-up, buying a business, purchase a building or acquire lease space. I am available to help other small businesses secure financing for Payroll and operating expenses through SBA loans or other products to keep their businesses running during these difficult times. Please feel free to reach out to me to start a conversation. I can be reached at (770) 874- 5019. Together we will Get Through These Tough Economic Times!
Charlene Shockley- Business Consultant, Real Estate Pro, Paralegal
It appears that up to $10,000 of funding will be sent ASAP
to small businesses. The Emergency EIDL Grant will be forgiven both through an EIDL loan and through a PPP loan
We are in Dry Cleaning industry we been seeing a shortfall in our revenues and production for the past three weeks, it started with 50% at the moment at 80%
We did apply Under Goverment care act for PPP through our bank on the first day the application was available on our bank’s website on April 03,2020 .
Once we applied we received a confirmation e-mail from our bank and yesterday we received another e-mail from our bank that the application has been processed and we need to get some documentation ( our complete payroll for 2019 and our payroll for January & February of 2020).
We have both the payrolls ready and waiting for our bank instructions to send it to them.
We also applied directly through the SBA link on there website for the Emergency Disaster loan on March 30,2920 and they provided us with the confirmation no. But we did got anything from the SBA so far.
Family business with no payroll just profit or loss. No business no pay! Is there financial relief for my type of business?
We have a small business lending affiliation with Lendio, a national group of almost 100 lenders across the country. We can help a client search for lending sources anywhere in the country with one application. We offer small business capital as one of our primary offerings but the CARES/PPP program is available thru nearly all of them. Accessing this large group of providers can dramatically improve the speed of the transaction. Some facilities are not equipped to handle this increased activity.
If anyone is interested please let me know and I will send them the link. I can be reached at xxx xxx-xxxx or [email address]. I can also send out our Employer Portal which will give you access to updated information on all of the CARES programs as updates are posted.
I have applied for the EIDL on the SBA website. I have yet to hear back. I am an LLC of 1 employee. Me. I also 1099 subcontractors. My understanding is I can also apply for the. Payroll Protection Loan as long as I don't use both for the same purpose. Can I use the EIDL for rent (i think that was what I requested it for on the application) and PPL for my "Payroll" loss and to assist my subcontractors with money lost due to my business being closed because of Covid-19?
I applied to EIDL for the 10k Grant on April 2nd. Have not heard back anything, no email confirmation, nada. Anyone know about that SBA loan/Grant?
- 2019 Payroll Cost and YTD Payroll Cost through February 15, 2020
- Number of employees as of December 31, 2019
- Number of employees as of February 15, 2020
- Industry or business classification (NAICS Code which can be found on tax return)
- IRS Form 940 Employers Annual Federal Unemployment Tax Return (FUTA)
- IRS Form 941 Employer’s Quarterly Federal Tax Return
- Payroll Summary Report 2019 with corresponding bank statements
- W2 Summary
- List of employees earning more than $100,000 in compensation (salary, wages, commission and tips)
- 1099 Summary
- Breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.)
- The above is the supporting documentation the bank wants, in addition to the simple 1 page application from SBA.