Banks on April 3 started processing applications from small businesses seeking paycheck-protection assistance under the $2.2 trillion stimulus package signed into law last week, according to Treasury Secretary Steve Mnuchin.
The Coronavirus, Aid, Relief, and Economic Security Act (CARES Act) features a program to provide cash-flow assistance to small businesses with 500 or fewer employees, including sole proprietors, independent contractors, and self-employed persons.
This cash flow comes in the form of a loan of up to $10 million, which can be fully forgiven if the funds are used for specified costs and if employees and employee salaries are maintained. Also, payments on those loans can be deferred for a minimum of 6 months and up to one year and may be subject to a maximum 1% interest rate.
Interested employers are encouraged to contact their bank to see if they are participating or contact the SBA to find a participating bank. These funds are available on a “first come, first-served” basis. The application form can be found here.
Some financial advisers and federal officials have encouraged small employers to also apply for an Economic Injury Disaster Loan, which provides up to $2 million of capital for certain business expenses. Under the CARES Act, after applying for this loan, the applicant can request an advance to be made available within 3 days. The advance can be up to $10,000 and does not need to be repaid. The CARES Act suggest that this loan can even be converted into a loan under the Paycheck Protection Program.