SBA Loan Programs Under the CARES Act

March 30, 2020

The CARES Act provides eligible businesses with various financing opportunities through the Small Business Administration (SBA) to support those businesses through the economic hardships caused by or related to COVID-19. Below is a brief explanation of the various financing opportunities that businesses may be eligible for.

Loan Programs

Businesses are permitted to participate in two major SBA loan programs, the Economic Injury Disaster Loan Program and the newly enacted Paycheck Protection Program made available through the CARES Act, both of which are summarized below. Eligible small businesses can qualify for both loan programs. However, businesses are not permitted to use both loans to cover the same expenses. *The SBA issued an interim final rule on April 2nd, 2020, further clarifying the Paycheck Protection Program (“PPP”). Text appearing in red is additional information provided in the interim rule.

Economic Injury Disaster Loan Program (EIDL) Paycheck Protection Program (§7(A) Program) (PPP)

EIDL, which is typically available in select states and counties, is now available in every state and county and offers eligible businesses lower interest rates to mitigate substantial economic injury.


PPP gives eligible businesses the funds to pay most employees their current compensation and benefits for up to 2 ½ months using an SBA §7(a) loan. There is potential full loan forgiveness.

Applications will be accepted through June 30, 2020, or until the funds made available for the PPP are exhausted. Loans will be made available on a first come, first serve basis.


Available directly through the SBA.


Available through participating SBA lenders.


The SBA determines the term of the loan on a case-by-case basis, with a maximum term of thirty (30) years. The interest rate for qualifying small businesses is 3.75%, and the interest rate for qualifying non-profits is 2.75%. Interest rates are not to exceed 4%. Monthly payment deferrals are available for up to one (1) year.

No prepayment penalties apply.

Origination fees are waived.

SBA will waive any personal guarantee on advances below $200,000 for loans made prior to December 31, 2020.


The interest rate is one (1) percent with a two (2) year maturity date. The principal and interest is deferred for six (6) months. Interest will accrue on the loan during the deferral period.

No prepayment penalties apply.

Origination fees waived.

These loans are unsecured and do not require personal guarantees.


Any small business, small agricultural cooperative, and most non-profits in the declared-disaster area are eligible. A small business typically has $750,000 to $36.5 million in total revenue and has anywhere from 500 to 1,500 employees, depending on the industry.  Eligibility is determined based on the Size Standards Tool provided by the SBA.

  1. Any private non-profit organization or public non-profit organization which:
    1. Meets one of the following two criteria:
      1. employs not more than 500 employees whose principal place of residence in the U.S., or
      2. is a business that operates in a certain industry that meets the applicable SBA employee-based size standards for that industry;
    2. has a small business concern; and
    3. was in operation and had paid employees or paid independent contractors as of February 15, 2020.
  2. The entity must certify that the uncertainty of the current economic conditions related to COVID-19 make the loan necessary to support ongoing operations of the entity.

No determination regarding duration of availability.


February 15, 2020 – December 31, 2020


The SBA office determines the amount of the loan on a case-by-case basis. The SBA’s determination is based on the gross profits information provided on the application. The maximum loan amount available is $2,000,000.00.

Maximum Loan Amount

Maximum loan amount available is the lesser of:

  1. [(aggregate payroll costs incurred during the one (1) year period before the loan is made for employees who live in the U.S. – compensation paid to employees in excess of an annual salary of $100,000 per year) / 12]= monthly payroll costs. [monthly payroll costs x 2.5] + [any outstanding amount of prior EIDL loans made between January 31, 2020 to the date the new loan is refinanced – any EIDL “advance”] = Amount of the Loan; or
  2. $10,000,000.00

** Alternative calculation applies to (i) companies that were not in business during period beginning on February 15, 2019 and ending on June 30, 2019 and (ii) seasonal employers.

refinancing opportunities for EXISTING eidl loans

EIDL loans made after January 31, 2020 may be refinanced in the covered period through the PPP.


EIDL loans made after January 31, 2020 may be refinanced in the covered period through the PPP.


Payment of fixed debts, payroll, employee benefits, accounts payable, and other bills that otherwise could not be paid due to economic hardships caused by or related to COVID-19.

  1. Payroll Costs:
    1. Employee salaries, wages, commissions, and similar compensation (compensation for an individual employee in excess of an annual salary of $100,00 is prorated)
    2. Paid vacation, sick, medical, or family leave (except FFCRA leave);
    3. Allowance for separation or dismissal;
    4. Costs related to the continuation of group health care benefits, including insurance premiums and retirement; and
    5. State and local taxes assessed on compensation of employees.
  2. Interest (not principal) payments of “Mortgage Obligations”;
  3. Rent payments;
  4. Utilities;
  5. Any other debt obligations that were incurred before February 15, 2020; and
  6. Costs of refinancing SBA EIDL loan issued between January 31, 2020 and April 3, 2020 to a PPP loan.

No loan forgiveness is available.


Borrowers are eligible for forgiveness of the full amount of the loan and accrued interest for costs incurred and payments made during the 8-week period after the origination date of the PPP loan for:

  1. Payroll costs;
  2. Any payment of interest (not principal) on any covered “Mortgage obligation” outstanding as of February 15, 2020;
  3. Any payment of rent on a lease in place as of February 15, 2020; and
  4. Any covered utility payment for services that began prior to February 15, 2020.

*seventy-five (75) percent of the loan forgiveness amount must be attributed to payroll costs.

Relief for Existing SBA Loans

The CARES Act directs the SBA to subsidize existing loans made through the § SBA 7(a), 504, and Microloan programs up to an estimated amount of $17 billion. The features to this subsidizing program are as follows:

  1. The SBA will pay the principal, interest, and any related fees that are owed on an existing covered loan for a six (6) month period, starting on the next payment due date;
  2. If a covered existing loan is already on deferment, the SBA will begin making these payments with the first payment after the deferral; and
  3. SBA loans that are made under § SBA 7(a), 504, and Microloan programs within the next six (6) months will also receive a full six (6) months of loan payments by the SBA.

Emergency Grants- EIDL Program

The CARES Act established a $10 million EIDL Emergency Grant program. Under this new program, entities that apply for the EIDL program (further explained in Section I) may request up to a $10,000 advance on the loan. SBA is required to distribute the emergency grant to the entity within 3 days of the entity’s request. If the entity is ultimately denied for the EIDL program, the $10,000 grant does not need to be repaid. If approved for the EIDL program, the emergency funds are treated as an advance on the EIDL loan and included in the EIDL proceeds that need to be repaid. Borrowing entities may refinance the EIDL loan, including the emergency funds, to a loan under PPP that may be eligible for loan forgiveness.

The emergency grant may only be used for the following expenses:

  1. paid sick leave to employees,
  2. maintaining payroll,
  3. increased cost to obtain materials,
  4. rent or mortgage payments, and
  5. repaying any obligation that cannot be met due to revenue losses.

The Emergency Grant program terminates on December 31, 2020.