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CARES Act for your Small Business


With the implementation of the 2020 CARES Act, there has been a host of information disseminated that may be confusing. To break it all down for you, NALA outlines major concerns and issues regarding the CARES Act in a question and answer format. Note that this Q&A is not all inclusive. It does not answer a lot of the questions surrounding the Act but gives you a general overview of the Act so that you can know how to navigate the murky waters of information on the internet.


Q: What is the CARES Act?

A: It is a stimulus package intended to address the economic recession resulting from COVID 19. Congress’ intent is to push money out to as many Americans as possible through small businesses.


Q: What is considered small business?

A: Businesses that employ less than 500 employees. This does not include contractors. Only those employees on your payroll.


Q: Does the Act apply to my business?

A: Yes. All businesses in operation before February 2020 are eligible for the funds under the Act. The exceptions are businesses with religious affiliations. That means that sole proprietors, LLCs, non-profits etc. are eligible for the funds.


Q: What if I have multiple businesses? Do I file one application for all of them?

A: No. The criteria is based on whether each business has its own EIN. Any business with an EIN should have its own application.


Q: How many different opportunities are there?

A: There are two main funding opportunities that are available for your small business. They are the Economic Injury Disaster Loan more commonly known as EIDL and the Paycheck Protection Program – known as the PPP.


Q: What’s the difference between the EIDL and the PPP?

A: For all intents and purposes, both funding opportunities are designed to help small businesses get through the COVID crisis. The EIDL is an emergency grant processed directly by the SBA on www.sba.gov. The PPP on the other hand, is a small business loan processed through your bank. The majority of the advice is to apply through the bank you currently have an account with.


Q: What is the criteria to apply for funds under this Act?

A: As mentioned above, one is that you have to have been in operation before February 2020. Not be religiously affiliated, employ under 500 employees and not have personally defaulted on a government loan in the past.


Q: I heard about some free money. What is that all about?

A: When requesting funds from the EIDL, it initially included a $10,000 advance. That is where the ‘free money’ came into play. Based on the number of businesses that applied, the government figured out that they did not have enough funds for the demand. Hence, the criteria changed to $1,000 per employee on your payroll up to $10,000.


Q: How long do I have to wait before I get the money? How will I get the money?

A: Currently, there’s a three-week processing period for the EIDL funds. For the PPP, the banks are still ironing out how to administer the funds so there is no definitive timeline for the PPP. Additionally, when applying, you will be asked for your bank account information. The funds are directly deposited into that account.


Q: Do I have to have filed my business taxes to get the funds?

A: No. You should still file it though.


Q: Is there anything that may hinder my application?

A: Just as you would apply for any other loan, the government will check your borrowing history. If you’ve defaulted on a government loan in the past, your application will be disqualified.


Q: Can I spend the money any how I want?

A: No. Although there are different criteria depending on which loan you’re referencing (EIDL vs. PPP), the general rule of thumb is to spend the funds on your business. The specific differences is beyond the scope of this blog.


Naturally, you may have a lot of follow up questions and other questions not covered by this posting. Please reach out to us and we will pair you with an attorney knowledgeable of the Act to help your small business get up and running.

Ethics is knowing the difference between what you have a right to do and what is right to do.

-Potter Stewart-