March 31, 2020
Area(s) of Interest: Public Health
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law on March 27, 2020, and provides $360 billion in funding for new Small Business Administration (SBA) loan and grant programs. Within the next two weeks, SBA will be providing more detail on the two new programs created by Congress – 1) the Paycheck Protection Program (PPP) and 2) the grant program under the Economic Injury Disaster Loan (EIDL) program. In the meantime, interested physicians can apply NOW for a COVID-19 related Economic Injury Disaster Loan.
Because of the enormous need and interest in small business loans, the California Medical Association (CMA) urges interested physicians to begin the process as soon as possible at covid19relief.sba.gov.
SBA defines small businesses as businesses with no more than 500 employees, which can include sole proprietorships with or without employees, and independent contractors.
Below is an explanation of the existing EIDL program, as well as the new programs.
Existing Economic Injury Disaster Loan Program
SBA provides targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the COVID-19 pandemic. The SBA’s Economic Injury Disaster Loan program provides businesses with working capital loans that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
EIDLs are loans of up to $2 million that carry interest rates up to 3.75% for companies, as well as principal and interest deferment for up to four years. The loans may be used to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.
A business that receives an EIDL between January 31, 2020, and June 30, 2020, as a result of a COVID-19 disaster declaration is also eligible to apply for a Paycheck Protection Program (PPP) loan or the business may refinance its EIDL into a PPP loan. In either case, the emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven in the payroll protection plan.
New Economic Injury Disaster Loan Grant Program
The new federal law provides a grant advance of $10,000 to small businesses and nonprofits that apply for an SBA economic injury disaster loan (EIDL). The grants will be provided within three days of applying for the loan. The new $10,000 EIDL grant does not need to be repaid, even if the grantee is subsequently denied an EIDL, and may be used to provide paid sick leave to employees, maintain payroll, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
Eligible grant recipients must have been in operation on January 31, 2020. The grant is available to small businesses, private nonprofits, sole proprietors and independent contractors, tribal businesses, as well as cooperatives and employee-owned businesses. SBA will issue additional details and guidance on the new program shortly.
New Paycheck Protection Program
The federal law includes nearly $350 billion in funding to create a Paycheck Protection Program (PPP) that will provide small businesses and other entities with zero-fee loans of up to $10 million. Up to eight weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels. However, loans for salaries above $100,000 are not eligible to be forgiven. Principal and interest are deferred for up to a year and all borrower fees are waived.
For additional information on these SBA programs, see CMA’s COVID Financial Assistance Toolkit.
Other good sources of information for small businesses struggling during this public health emergency include: