What Small Businesses Need to Know about the Stimulus Bill

The $2 trillion stimulus package signed into law is the largest emergency aid package in U.S. history. It has provisions that help workers, small businesses, and different U.S. industries that are struggling during this pandemic. We wanted to take a closer look at what the stimulus package will do to help small businesses.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act creates a $350 billion loan package that is designed to help small businesses while encouraging them to avoid layoffs. The loan is forgivable and does not need to be paid back during what is called a “covered period.”  This period is eight weeks, chosen by the small business owner and the lending agency, between Feb. 15, 2020 and June 30, 2020. But, if a small business needs to lay off employees during the covered period, the amount of the forgivable loan will be reduced proportionally. If a small business reduced its workforce by half, the loan amount would be reduced by 50%. However, if all employees are rehired at their full salaries by the end of June, there would be no reduction of the loan.

Here are some other key points of the legislation as it relates to small businesses:

• Any business with fewer than 500 employees is eligible for the loan.
• The loans are tax-free and payments are deferred for one year.
• The maximum loan amount a business can receive is $10 million, depending on how much the business paid its employees in January and February.
• Self-employed individuals, sole proprietors, and independent contractors also are eligible.
• Priority will be given to businesses in under-served and rural markets, including women, socially and economically disadvantaged individuals, veterans and members of the military community, and businesses that are less than two-years-old.
• All operating costs, including payroll, utilities, mortgage, rent, and debt payments, are included.

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For reference, we are including the full text of the legislation.

Our blog, SBA Disaster Assistance Loans Available to NC Small Businesses, also provides helpful resources and information for businesses dealing with the impacts of COVID-19.