CARES Act Provisions and Business Loan Program Guidelines

After days of negotiations, Congress has passed the third phase of federal relief legislation in response to COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This bill will provide $2 trillion in economic aid to individuals and businesses impacted by the coronavirus public health emergency. The President is expected to sign immediately.

We’ve included some of the key takeaways from this bill that apply to both businesses and individuals, as well as information on critical loan opportunities for small businesses.


  • Rebate checks to be distributed to U.S. taxpayers of up to $1,200 and an additional $500 for every child. These benefits will begin phasing out for higher-income taxpayers beginning at $150,000 for married couples, $112,500 for a head of household filers, and $75,000 in adjusted gross income for a single taxpayer. These payments will be based on 2019 tax returns, if filed, or 2018 tax returns. Checks are expected within weeks and, if you have your bank information in your latest filed federal income tax returns, the appropriate amount will be electronically deposited.
  • Unemployment extended for an average of 4 months
  • Mortgage relief for skipping payments or forbearance for borrowers insured by government agencies (FHA, Vets)
  • Creates an above the line deduction for charitable contributions up to $300, modifies the adjusted gross income limitation on contributions to 100% for individuals (25% of taxable income for corporations) for 2020.
  • Certain employer payments of student loans on behalf of employees are excludable from taxable income of the individuals, up to $5,250 annually.
  • Permits Americans with federal student loans to suspend monthly payments through 9/30/20 without any interest accruing.
  • REAL ID Act (driver’s license and identification card requirements program) delayed until at least September 30, 2021
  • Over-the-counter medical products become permissible expenditures for funds in HSAs and FSAs


SBA Loans

As we reported in our previous advisor, the Small Business Administration is offering low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of COVID-19. Below are the details:

  • Low-interest loans of up to $2 million are available for small businesses and private nonprofits.
  • Anyone who owns 20% or more must provide a personal guarantee.
  • Collateral is required based on the loan amount. The SBA will take a blanket lien on business assets or lien on other assets, if available. SBA prefers real estate collateral.
  • The loan is a five-year term, but certain circumstances could be up to 30 years.
  • 3.75% fixed rate for small businesses (2.75% for nonprofits)
  • Not forgivable and not available if also taking the Small Business Interruption Loan (see next section below)
  • Eligible for 12-month deferred repayments
  • A $25k unsecured loan can be taken within 5 days – but the volume of expected activity may increase time delays.
  • The application requires updated financial statements and a 6-month cash flow projection.

The SBA has listed state-by-state disaster declarations, facts and other related links on their site.

Small Business Interruption Loan Availability (Paycheck Protection Program)

The government would provide loans to small and midsize businesses to prevent layoffs and to continue paying employees. Individual loans provided with the intent to cover six weeks of rent and utility payments, certain debt services and payroll, limited to $100,000 of annual compensation per employee. Available to businesses with 500 or fewer employees that continue to employ and pay workers through the coronavirus crisis. Limitations – no stock buybacks, limits on executive bonuses, take steps to protect workers.

  • Not available if also taking SBA Loan. For businesses with existing SBA loans, principal and interest would be waived for six months.
  • Loans are made through banks. Underwriting and regulatory guidance needs to be developed and is not yet available. A processing fee applies: 5% for loans up to $350k, 3% for loans between $350 and $2M; 1% for loans of $2M or more.
  • Forgivable provided meeting certain requirements
  • Max loan is the lesser of $10M or 2.5 times the borrower’s average monthly payroll and benefits but appears limited to employees making less than $100K annually. It is expected that the SBA will address in regulation whether any other costs might be applicable. For incomes more than $100K annually, the excess over the threshold reduces the borrowing max.
  • Standard SBA fees are waived
  • No collateral or personal guarantees
  • Maximum maturity of the non-forgiven component of any loan is 10 years, interest at 4% loan repayment can be deferred at least 6 months and up to 12 months
  • SBA Express Loans – limit increased from $350k to $1M.
  • Loan forgiveness for certain expenses over an 8-week period starting on the date of the loan.
  • Forgiveness of the loan is allowed for the total of expenditures that the lender reasonably expects the borrower to expend during this 8-week period for payroll and benefits costs, interest on existing mortgage debt and rent in place prior to 2/15/20, and utilities.  (It is unclear if this includes expenses incurred but not paid prior to the date the loan was originated.)  Loan forgiveness will not be considered taxable income.
  • The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior-year compensation. To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.


  • The business was in operation as of 2/15/20, had employees or independent contractors, and was substantially impacted by COVID-19. The business would be expected to provide within its application a good-faith representation stating how they were impacted by COVID-19.
  • Any business or nonprofit (private or public) with no more than 500 employees (nonprofits that receive Medicaid expenditures are not eligible)
  • Other eligible small businesses include:
    • NAICS Codes starting with 72 so long as fewer than 500 employees per location (hotels, casinos, restaurants, and other travel and entertainment)
    • Franchise operations
    • Licensed small business investment capital companies
  • May be eligible even if the entity has access to capital from other sources

The SBA has 30 days post-enactment to issue regulatory guidance, which will be necessary to clarify a number of points within the law.

We remain poised to help you and your business navigate these disruptions caused by this pandemic. Please contact your BMF Advisor to discuss your best course of action for you and your business.

Visit our COVID-19 Resource Center for the latest updates and resources for you and your business.

    About the Authors

    Dale A. Ruther
    Dale A. Ruther
    Partner Emeritus,
    James E. Merklin
    James E. Merklin
    Partner, Assurance and Advisory


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