Second Phase of CARES Act Provides Additional Funding for Small Businesses
On Friday, April 24, 2020, the President signed legislation approving a $484 billion spending package for the Coronavirus Aid, Relief and Economic Security Act (CARES Act), which includes additional funding for the small-business loan program that was quickly drained, and allocate more funds for health-care providers and virus testing.
The measure includes an additional $310 billion in funding for the Paycheck Protection Program, $60 billion of which is reserved for community banks and small lenders; an additional $60 billion for Emergency Injury Disaster Loans; $75 billion for hospitals; and $25 billion to support testing efforts.
With this additional funding, the Paycheck Protection Program (PPP), which ran out of their original funding allocation in several weeks, may now continue. The new funding will first go towards small business owners who have already applied for PPP funding. Businesses who have not already applied for funding are encouraged to do so very quickly. Additional funding for Emergency Injury Disaster Loans (EIDL) is currently being applied towards businesses who have already applied of for the program.
The Paycheck Protection Program proved extremely popular but also controversial, in part because some large hotel and restaurant chains were able to access funds while many smaller firms were not successful. In response to this, the Treasury Department has issued guidance making it much harder for large, publicly traded companies to qualify for money that is intended for small businesses. The guidance among other things, states that loan recipients are expected to self-certify “in good faith” that they actually need the funds.
For more background on the CARES Act and financial programs, please refer to our prior post. Businesses may learn more about the Paycheck Protection Program here. They may apply for the program through their bank, or through a variety of online ‘fintech’ lenders as well. You may look up local banks providing loans here and learn about online lenders here. Businesses may learn more about the Economic Injury Disaster Loans, which are being granted by the Small Business Association (SBA) here. The SBA, has stated that it will provide more information about the ability for new businesses to apply for the program soon.