By: Stacy Cowley
The provisions include cash grants, and low-interest loans.
Here are the answers to common questions about these programs.
Who is eligible for relief?
Businesses and nonprofit organizations with fewer than 500 workers are eligible for aid, including sole proprietorships, independent contractors and freelancers.
What does this do?
The program offers loans of up to $10 million to cover eight weeks of payroll plus some additional expenses, like rent and utilities.
The loan can effectively turn into a grant. The S.B.A. has waived many of its usual requirements for these loans and will not require collateral for them.
How much can I borrow?
Companies can borrow up to two months of their average monthly payroll costs for the past year, plus an additional 25 percent, up to $10 million. “Payroll costs” include salary, wages, tips, commissions, paid leave benefits, employer-paid health insurance premiums and state and local payroll taxes.
I’m self-employed. How do I calculate my payroll cost?
The CARES Act text says that you can claim your “wage, commission, income, net earnings from self-employment or similar compensation,” up to $100,000 a year. You may need to work with your accountant or lender to confirm what qualifies.
How much hardship do I have to have to apply?
There are no specific requirements. You do not need to prove a sharp drop in sales or a forced business closure, for example.
Applicants simply have to certify that “current economic uncertainty makes this loan request necessary” to support their ongoing operations.
What can I use the money for?
The loans cannot be used to refinance previous loans; anything else is fair game. If you use money from a disaster loan to pay your employees, you can try to refinance through the paycheck protection program, which allows for the loan to be forgiven.
What documents do I need?
Each lender will set its own rules, but this sample loan application covers the basics.
You’ll need to document your average monthly payroll (generally as of Feb. 15, 2020) and provide records on other expenses you’re looking to cover, like rent and utilities.
Once it’s time to ask for the loan to be forgiven, expect your lender to ask for more documentation.
Will the money for these programs run out?
Probably yes, and possibly quickly. Both programs have limited funding and are first-come, first served. President Trump and others in his administration have said they will ask Congress for more money if the aid runs out, but Congress will have the final say.
How do I apply?
You must apply through a bank or other lender, so start by contacting one you already have a relationship with. Many banks are imposing restrictions and choosing to work only with their existing business customers.
The Treasury Department said the program would start taking applications on April 10th, two weeks after the bill was signed into law.
What’s the application deadline?
That’s the date Congress set for disbursement of the $349 billion it allocated for the program, but the money is likely to run out faster. That means some applicants will be turned away unless Congress authorizes more funding. On Tuesday, the Treasury Department said that it will request at least another $200 billion.
Stacy Cowley is a finance reporter with a focus on consumer issues and data security. She previously reported on a variety of business topics, including technology and economics, at CNN Money, Fortune Small Business and other magazines and websites. @StacyCowley