Disclaimer: This article is intended to be helpful and informative, but should not be taken as legal counsel. If you have specific legal or tax questions, you should consult your attorney or tax advisor, as appropriate. Xometry is not affiliated with the United States Small Business Administration (“SBA”) and does not act as a lender or referral agent for SBA lenders. SBA loan programs are subject to eligibility. Please consult with a counselor for the SBA or a licensed SBA lender for additional information.
CARES (or Coronavirus Aid Relief, & Economic Security) Act is a stimulus bill designed to address the economic impact caused by the COVID-19 health crisis. One of the major components of the CARES Act relief package is the Paycheck Protection Program (PPP). The PPP is being administered by the Small Business Administration (SBA), which provides for loans of up to $10 million per small business applicant to be used on payroll, benefits, rent, and other authorized costs from February 15, 2020, through June 30, 2020.
The initial $349 billion in funding has already been allocated and the Federal government recently injected another $310 billion in additional funding last week. Here’s what you need to know about the newly allocated funds:
- Check your eligibility. Small businesses containing fewer than 500 employees (with some exceptions), and those that were open on February 15, 2020, can apply. Here’s Intuit’s eligibility calculator to determine your eligibility.
- Familiarize yourself with the loans included in the CARES Act. The Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) can be business savers for your manufacturing shop.
- If you are in need of and qualify for the loans, you should move fast. The initial funding was exhausted within 2 weeks.
More details on the Paycheck Protection Program (PPP)
This loan has a maturity of 2 years, an interest rate of 1.00%, and loan payments will be deferred for 6 months. You can learn more about these loans and eligible lenders on the SBA website. PPP loans can be eligible for forgiveness if they are used on payroll costs, to pay rent or utilities, or to cover the interest on a mortgage (excluding principal payments ). You can also use PPP funds to pay interest on any other debt obligations incurred before February 15, 2020.
In addition to PPP, Economic Injury Disaster Loans (EIDL) are available
Economic Injury Disaster Loans are low-interest loans available to any small businesses experiencing economic hardship due to a disaster or pandemics like COVID-19.
Through the CARES Act small businesses that apply for an EIDL between January 31, 2020, and December 31, 2020 (subject to the program maximum of $10B) can simultaneously request a grant of up to $10K. If you meet the eligibility requirements of the EIDL, you will receive your grant in up to 3 days. Your business will not need to repay the grant, even if the EIDL application is later denied. The grant funding can be used to cover most expenses caused by COVID-19 related economic hardships, including:
- Meeting increased costs to obtain materials unavailable from the original source due to interrupted supply chains
- Providing paid sick leave to employees unable to work due to COVID-19
- Maintaining payroll to retain employees during disruptions or slowdowns
- Making rent or mortgage payments
- Repaying obligations that cannot be met due to revenue losses
A small business that received an EIDL between January 31, 2020, and April 3, 2020 can refinance their EIDL into a PPP. Small businesses may also apply for an EIDL right now, and for a PPP later, as long as they’re used for different purposes.
See the SBA website for more info about EIDLs.
Where Can I Apply For the EIDL or PPP?
Not only can you apply for either of these CARES Act loans through your bank, or credit union, you may also utilize approved nonbank lenders such as Intuit/QuickBooks Capital, Paypal, and Square Capital. Check out Forbes’ full list of nonbank lenders and how to vet them.
Additional Questions About the CARES Act?
- Global law firm Cooley LLP’s Overview and FAQs on the CARES Act
- A Small Business Owner’s Guide to the CARES Act from the Senate Committee on Small Business and Entrepreneurship
- The Small Business Administration's FAQs on PPP loans
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