How the Senate Coronavirus Stimulus Bill Helps Small Businesses
What the CARES Act stimulus package could mean for your business
The stimulus package that emerged from the Senate last night is an extraordinary measure offering significant relief to both small business owners and their employees impacted by Covid-19. Here are a few key details on how the Senate Bill proposes to help small businesses:
How the Senate is proposing to distribute funds to small businesses
The Senate bill uses existing SBA lending tools (the 7a program) to get money out to small businesses with less than 500 employees within 48 hours of the law passing.
How small businesses will get the funds
Your existing bank will loan you money under the 7a program. Loans will be determined based on the two months of qualified costs that the small business incurred in the 60 days prior to February 15th. There is language that the loan amount could be extended to 4 months. The maximum loan in the Senate version is currently $10M and all loans will be 100% guaranteed by the Federal Government.
How these funds must be spent properly to be forgiven.
The stimulus package is meant to protect your employees and your business. For your loan to be forgiven, you must spend the money to pay for:
- Paid or sick medical leave
- Insurance premiums
- Rent or lease payments
- Utility costs
- Mortgage payments
- And any other debt obligation
Later this year, you will need to demonstrate that the funds were spent on these qualified expenses and the loan will be forgiven – effectively converting into a grant.
Side note: Small businesses with a government grant or contract
If your business receives funds for a government grant or contract, note the period of performance will automatically extend by 30 days unless mission critical.
For a detailed executive summary of the Senate Bill, please click here.