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COVID-19 & CARES Act Financial Planning Series: #3 "Small Business Relief"

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief for small businesses who are having trouble covering payroll and operating expenses because of the COVID-19 pandemic.  The new law has created incredible benefits for small businesses owners, but these benefits come along with confusion and lack of clarity.  Time is of the essence for small businesses to maximize the benefits available, so let’s jump into the available programs in order of time sensitivity:

SBA Economic Injury Disaster Loans and Emergency Grants

There is currently some confusion around this program. However, the bottom line is that a small business may receive up to a $10,000 grant. Although the CARES Act refers to this as a “loan advancement”, it is considered a grant and not a loan.  Only $10 billion of funds have been allotted to this program so it is likely that these funds will dry up quickly.  In order to request the grant, you must apply for an Economic Injury Disaster Loan (EIDL).   The $10,000 grant does not need to be repaid even if the applicant is denied an EIDL.  To apply for the grant/loan, CLICK HERE.

A small business may apply for both an emergency grant and a Paycheck Protection loan (next on the list).  However, it is important to understand that the emergency grant will be subtracted from the amount of the Paycheck Protection Program loan that is forgiven.

SBA Paycheck Protection Program

The Paycheck Protection Program (PPP) provides small businesses with zero-fee low-interest loans of up to $10 million to cover payroll and other operating expenses.  Certain costs such as payroll, mortgage interest, rent, and utility costs can be forgiven.  $350 billion of funds have been allotted for this program. Although this sounds like a lot of money, there are over 30 million small businesses nationwide that will likely be seeking these funds.  The loan can be forgiven if qualified expenses are covered in the first 8 weeks of receiving the proceeds. Because the forgiven amount could be viewed as “free money”, we believe these funds will also go quickly.

In order to apply for the Payroll protection loan (PPL), the application must be submitted through an approved SBA Lender.  Contact your current bank or visit the Small Business Administration website for a list of SBA lenders.   Here is the application.

Employee Retention Tax Credit

The CARES Act also created a refundable payroll tax credit for businesses (large and small) and non-profits who retain employees during the COVID-19 crisis.  The tax credit is equal to 50% of wages and compensation.  There is an overall limit on wages per employee of $10,000.  The credit is provided through December 31, 2020 and detailed information can be found on the IRS website.

This tax credit is not available if the employer takes an SBA paycheck protection loan.  Therefore, a business will need to determine if the tax credit or the Payroll Protection Loan is the better route.

Planning Opportunities

There is currently some confusion in how to best maximize these benefits as a small business as the banks scramble to adopt the logistics of the CARES Act.  Please be sure to work with your CPA or tax professional and check the Treasury website for updates.  The lack of clarity and lack of funds for these programs creates a dilemma.  Should a business owner wait for clarity and therefore wait to apply but possibly miss out on funds, or apply immediately and work on the details later?

Additional Resources:

IRS – Coronavirus Tax Relief

SBA – Funding Programs

US Dept. of Treasury – Assistance for Small Businesses

IMPACTfolio’s COVID-19 & CARES Act Financial Planning Series

#1 – Where’s My Check?

#2 – Taking A Break From Student Loan Payments

For more detailed information on The CARES Act, we recommend that you read this excellent article.


Scott Arnold, CFP®, has been in the financial services industry since 1998.  He is the founder of IMPACTfolio, awealth management firm that specializes in sustainable and IMPACT investing.  For more information, visit https://impactfolio.co/