CARES Act & SBA Loans

CARES Act & SBA Loans

DISCLAIMER: I am not a loan officer, lender, employee of the government, or the state. I am simply a CPA that cares for her clients that are struggling with all of the BRAND NEW information regarding the CARES Act and SBA Loans.  All opinions are simply an interpretation of the CARES Act and not to be used as support or guidance for applying for a loan or any other financial related advice.

UPDATED as of 4/2/2020 @ 10:00PM MST

Dear Clients and Friends,

I want to stay in my lane, I am a CPA and NOT an SBA loan officer or representative of a government agency. I’ve studied extensively on subjects that are days/hours old and have been rapidly changing.  We are in uncertain times.  I created this content with the intention to help out those business owners not sure what to make of all of the options they have, add my thoughts and point you in the best direction I know of right now. I will update as often as I can.

I’ve also put together a summary of the tax related subjects surrounding Covid-19 here.

Overall thoughts on these loans

Don’t make the mistake

Business owners who have NEVER been able to qualify for SBA loans in the past, are now able to qualify with low rates, with no prepayment penalties, no loan fees, long terms etc. Do not make the mistake that just because you didn’t previously qualify, that none of this applies to you.

It is VERY likely it ALL applies to you. Including sole proprietors and independent contractors. If you see language that it doesn’t… it’s probably just outdated language. This Act is only a few days old and changing very rapidly.

Is there urgency to apply right now?!

Depends on who you ask. Based on the fact that there are potentially at least 800,000 qualifying small businesses. The loan process will probably be held up for a while. If you wait to apply until you are down to your last penny, it could be weeks or months until you get funds.

I’m just doing math in my head, and to take advantage of all resources I would act ASAP. See how below.

Although I STRONGLY discourage debt, here are my thoughts on these specific SBA loans:

Logically speaking, we do not know how long we will be in this emergency state.

The interest rates are shockingly low. So, these SBA loans would HANDS DOWN beat out any credit card debt you may build up over the next few months. If you have existing credit card debt, you may consider consolidating into these low interest SBA loans.

There are no prepayment penalties on these loans, which means if you end up not needing the money, you can pay it back and potentially pay a tiny amount of interest. That is a very small cost to have that safety net.

So what do I think? This is 100% opinion only, and I cannot at all advise you on how to handle debt:

If you are faced with alternatives that would cost you MORE than the small interest these loans offer (credit card interest, penalties, late fees, eviction), I would seriously consider applying for enough money to cover you for several months.

Worst case, you don’t need the loan and you pay it back early with a tiny amount of interest. A small amount of interest is not a bad price to pay for a world of peace that a back-up plan could give you in these difficult times.

But You need to do what is in your best interest and aligns with your values.

There are two major types of loans

First, there is the Economic Injury Disaster Loans (EIDL), which has always been around but due to recent events has significantly lowered requirements to be more available to all business owners including the self-employed. It comes with a potential $10k grant.

Second, there is the Paycheck Protection Program (PPP) which was created as a direct incentive for small businesses to keep their employees on payroll. Up to 100% of the loan is forgivable.

The U.S. Chamber of Commerce put together a great summary on these loans.  Small Business Guide and Checklist

Already know about these? Skip to my FAQs below.

Economic Injury Disaster Loans (EIDL) and the Emergency Economic Injury Grants

This relief is meant to provide emergency cash injections into small businesses who are currently experiencing temporary loss of revenue.

The grant portion provides an emergency advance of up to $10,000 almost immediately to small businesses harmed by COVID-19 within 3 days of applying for an SBA Economic Injury Disaster Loan. The total loan limit is $2 MIL.

This is a direct SBA loan so you must apply through the SBA (not through a lender) and make sure to check the box to request the $10K advance if you want it. To apply for a COVID-19 Economic Injury Disaster Loan, click here.

According to and many other sources, these $10k advances are going to be forgiven or “granted”. In other words, you don’t have to pay it back! Even if you don’t end up qualifying for the loan, it states that the $10K will be totally forgiven.

Quick Summary

  • Loans are up to $2 MIL
  • The term is 30 years
  • Interest rates are 3.75% (2.75% for nonprofits)
  • The first month’s payments are deferred a full year from the date of the note.


Who is eligible?

Businesses with 500 or fewer employees including:

  • Sole Proprietors with or without employees
  • Independent contractors
  • Cooperatives and employee owned businesses
  • Tribal small businesses
  • You must have been in business since January 31, 2020.


What is the loan process like?

Well it has only been available for a day or two right now. But here is the feedback I have heard:

  1. It takes about 5-10 minutes to apply and the only financial thing they ask for is your gross sales, and cost of goods sold. These numbers come from:
    • If you are a sole prop or single member LLC – Sch C Part 1 line 1 & line 4
    • If you are a C Corp, S Corp or Partnership – Form 1120/1120S/1065 line 1a & 2
  2. The process is super simple so that people can get that $10K advance that is supposedly coming within 3 days after initial application is reviewed and approved by SBA underwriter. But there will be a follow up to further qualify you for the loan. This is the part where you should have your ducks in a row.
    • Get your YTD profit and loss ready
    • Get 3 years of returns gathered


How long until the loan is funded?

This is unknown. With this many people applying at the same time, the limited relief, and the state the entire world is in – my only recommendation is to apply ASAP.

If you aren’t sure about applying, I would imagine you could end up turning it down if/when the time comes you don’t end up needing it.

So as of 10:00PM MST on 4/2/2020…In my opinion, it sounds like a no brainier to just apply – I’m not seeing a downside but will update if we find one. But yet again, this is not advice and simply a personal opinion.

Paycheck Protection Program (PPP)

These are 100% federally guaranteed loans to small businesses that can be up to 100% forgivable.

Quick Summary

  • 2 year repayment term
  • 1% interest rate
  • No loan fees to small business (paid to lender by SBA)
  • No prepayment fees
  • Apply by June 30th, 2020
  • Deferred payments of up to 6 months after disbursement
  • Principal can be forgiven, but small business still responsible for interest

Who is eligible?

  • A small business with fewer than 500 employees
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates as an independent contractor
  • An individual who is self-employed who regularly carries on any trade or business

How much can I get?

You can borrow up to 250% of your average monthly payroll expenses up to $10MIL. The use of these funds is to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. The covered period can apply to any time frame between February 15, 2020 to June 30, 2020.

Which expense types are forgivable?

The amount that is fully forgivable is equal to the sum of expenses for payroll, interest payments on mortgage, rent and utility expenses. If you want to use the loan for other purposes you can, but that portion will not be forgivable.

How much of the loan will be forgiven?

The point is to retain employees and their salaries, if you retain 100% then all of it will be forgiven (assuming you used funds for the types outlined above). If you lay off employees or reduce their salaries greater than 25%, the forgiveness will be reduced.

What if I’ve already laid off employees?

If you’ve already laid off employees – you can rehire them and still do this program.

When is the loan forgiven?

At the end of the 8-week period after you take out the loan.

How to apply

These loans are applied directly with SBA loan officers, and they are getting guidance THIS WEEK on how to process these loans.

Many banks (who didn’t previously deal with SBA) are going to be able to handle these because of the mass amount of volume of businesses in need. Start with your own bank, then reach out to other local banks.

Here are the items I think you should have ready for this application:

  1. Forms 941 – to document your payroll expenses
  2. Summary of 2019 payroll expenses and payroll taxes per employee to calculate “Payroll Costs” and determine current FTE
  3. YTD profit and loss
  4. 3 years of returns gathered

Other things to note on PPP:

It appears that these loans are made specifically for employers who want to retain their employees and keep them off unemployment. Especially with the added forgiveness of rent, utilities and or mortgage interest – this sounds ideal for a business owner with employees and a brick and mortar location.

I am not saying that it is only for those types of businesses, but it appears that it is what they are designed for.


What’s the harm in applying to both?

I’m currently not really seeing one. There will be hoops to jump through once you get to the loan officer but getting in the queue for the EIDL ASAP seems like a no-brainer. You could always turn down the loan based on the professionals whom I’ve spoken with. So to do this, you would apply for EIDL now, and then get in contact with a SBA lender so you can start the PPP process as soon as you can.

A loan officer should potentially take everything from there on and walk you through your best options.

Can you get forgiveness from both loans?

You can have BOTH loans but you can’t overlap the expenses between them. For example, don’t use the EIDL for payroll if you are using PPP for payroll.

I’ve also heard that receiving the EIDL grant will lower the amount forgiven from the PPP by the grant amount.

Once you receive the PPP you can roll the EIDL into and have one consolidated loan.

Okay, but if I HAD to choose one loan…

To decide, I suppose I would consider my main problems/expenses.

If payroll is your largest expense and keeping employees and the lights on is your main objective, it appears the PPP is best.

If your main fear is cashflow, then the long term of 30 years for the EIDL is incredibly attractive. Lower payments over a long period of time.

If urgency in funds is the main problem, EIDL seems like the way to go.

Can I apply for Unemployment AND these loans?

PPP – It’s relatively clear you cannot benefit from unemployment while participating in the covered portion of the PPP. Since it is based on active wages, and unemployment doesn’t allow active wages I do not see how you could access them simultaneously. Could you do unemployment until you get the PPP loan? It appears that you can.

EIDL – its unclear. I haven’t read anything showing that you can’t do both unemployment and an EIDL, however this is just a completely unknown area. I have read that some are taking advantage of unemployment until the EIDL funds – but cannot speak on whether that is okay to do.


Are these forgiven portions going to be taxable?

PPP – It’s stated that the forgiven portions are NOT taxable.

EIDL – It is not yet stated…I would be shocked if they were taxable but since it’s not clear I would set aside 30% in case it turns out to be taxable.


What about these loans and the payroll tax credits?

PPP – It is stated that you can’t take the credits along with the loan.

EIDL – Unclear

Are these two loans my only options in the world?

NO! But they do appear the most generous and timely. Here are some other options:

SBA Debt Relief Program

SBA Express Bridge Loans



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