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CARES Act: Small Business Emergency Loans

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. 


It's important to understand that these loans may be forgiven if the small businesses who borrow maintain their payroll during the crisis and restore their payroll after.


The administration will soon release more details including a list of lenders offering loans under the program but in the meantime, you can use the below guide to better prepare to file for your small business loan. 


CARES Emergency Loans: 

Are you eligible?

To be eligible, you must: 

  • Have < 500 employees
  • Meet SBA's size standards
  • Be a 501(c)(3) with < 500 employees
  • Operate as a sole proprietor
  • Operate as an independent contractor
  • Be self-employed and regularly carries on business/trade
  • Be a Tribal business that meets SBA size standards
  • Be a 501(c)(19) Veterans Organization that meets SBA size standards

Additionally, these special rules may make you eligible:
  • If you are in the accommodation and food services sector (NAICS 71), the 500-employee rule is applied on a per location basis.
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company, the normal affiliation rules do not apply. 

Lenders are looking for: 

In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors. Lenders will ask you for a good faith certification that: 

  • The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations. 
  • The borrower will use the loan to retain workers and maintain payroll.
  • The borrower doesn't have an application pending for a loan duplicative of the purpose and amounts applied for. 

If you're a sole proprietor, independent contractor, or if you're self-employed, lenders will also look for certain documents such as payroll tax filings, Forms 1099-MISC, and income and expenses. 

How much can you borrow? 

Loans can be up to 2.5 x the borrower's average monthly payroll costs, not to exceed $10 million.


Sum of included payroll costs - Sum of excluded payroll costs = Payroll costs


Included payroll costs for employers: The sum of payments of any compensation with respect to employees. 

Included payroll costs for sole proprietors, independent contractors, and self-employed individuals: The sum of payments of any compensation that is a wage, commission, income, net earnings, or similar and doesn't exceed more than $100,000 in one year. 


Excluded payroll costs include: 

  • Compensation of an individual employee in excess of an annual salary of $100,000. 
  • Payroll taxes, railroad retirement taxes, and income taxes. 
  • Any compensation of an employee whose principal place of residence is outside of the US. 
  • Qualified sick leave wages for which a credit is allowed under the Families First Coronavirus Response Act.

Will this loan be forgiven?

Borrowers are eligible to have their loans forgiven, but how much? 

A borrow is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan: 

  • Payroll costs
  • Interest on the mortgage
  • Rent on a leasing agreement
  • Payments on utilities
  • For borrowers with tipped employees, additional wages paid to those employees

What's next? 

As additional guidance and information about eligible lenders become released from the SBA, we will continue to update this blog so you can ensure you're prepared. 


For more guidance and resources, visit


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