Covid-19: How Cares Act Helps Businesses

Cares & Acts

On Friday, March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was approved by Congress and signed into law by President Trump. The CARES Act creates new federal Small Business Administration (SBA) loan programs or amendments to existing programs that could assist businesses that have been impacted by the COVID-19 pandemic with their day-to-day operating expenses.   

We recommend visiting the Small Business Administration website. This is an excellent resource for information and ongoing webinars on the current issues. You do not have to be a member to participate. Participation is free of charge.

As small business owners, we want to pass along information about how the CARES Act could help you and your business during the COVID-19 crisis. Below are resource programs designed to help small businesses through this crisis.

Economic Injury Disaster Loans

The SBA’s Economic Injury Disaster Loan (EIDL) program is an existing SBA program that provides working capital loans to help businesses meet their ordinary and necessary financial obligations that cannot be met as a direct result of a disaster. Now, with changes proposed in the CARES Act, businesses with 500 employees or less are now eligible for EIDL loans.

These loans are available in declared disaster areas throughout the country and intend to assist affected businesses through the disaster recovery period of Jan. 31, 2020, through Dec. 31, 2020.

Click to learn more about the EIDL program.

Paycheck Protection Program

The CARES Act also creates a Paycheck Protection Program, offering forgivable loans of up to $10 million to any “business concern,” including independent contractors and sole proprietors, with 500 or fewer employees. The loan is 100 percent backed by the SBA and can be used for payroll, group health, mortgages, rent, debt service, and utilities.

The loan program period is from Feb. 15, 2020, through June 30, 2020.

Click to learn more about the Paycheck Protection Program

Express Loans

The CARES Act increases the maximum amount for an SBA Express Loan from $350,000 to $1 million through Dec. 31, 2020.

Click to learn more about SBA Express Loans

Michigan Small Business Assistance

In addition, The Michigan Strategic Fund recently authorized the funding of the Michigan Small Business Relief Program, which will provide up to $20 million in grants and loans to support businesses facing drastic reductions in cash flow and the continued support of their workforce.

The program authorizes the Michigan Economic Development Corporation (MEDC) to provide up to $10 million in small business grants and $10 million in small business loans to support businesses facing drastic reductions in cash flow and the continued support of their workforce.

The MEDC anticipates that at least 1,100 businesses across the state will benefit from this program. Funds are expected to be available no later than April 1, 2020.

Click to learn more about the Michigan Small Business Relief Program  

Existing SBA Loans

If you have an existing SBA loan, SBA will pay the principal, interest, and fees on the loan for a period of time. Check with your banker on existing SBA loans.

Company Retirement Plans

Please also note that several advantageous changes pertaining to retirement plans are available.

Special Rules for Use of Retirement Plan Funds:

You are able to take a distribution from up to $100,000 from your current retirement plan; the distribution is NOT subject to the 10 percent penalty for early distribution; you will pay the income taxes, but those income taxes are payable over the next 3 years.  The distribution must be “coronavirus related” but the conditions are construed liberally:

A coronavirus related in-service distribution may be made to an individual:

  1. Who is diagnosed with COVID-19;
  2. Whose spouse or dependent is diagnosed with COVID 19;
  3. Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child- care, closing or reduced hours of a business owned and operated by the individual.

The CARES Act also waives the Required Minimum Distribution for 2020- and does not affect the effective date of the SECURE Act change in the age at which RMDs must begin (age increased from 70-1/2 to age 72 for individuals who had not reached age 70-1/2 by Dec. 31, 2019). The changes in the RMD rules appear to be required. 

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