Using the CARES Act to Keep Your Business on the Road to Transformation

Apr 1, 2020Business Leadership Transformation

You are probably aware that the government recently signed the CARES Act into law. In short, the CARES Act is a wide-ranging emergency fiscal stimulus package created to help ease the economic damage that is resulting from the COVID-19 pandemic.

Within this act there are 4 primary benefits that serve to bring assistance to small businesses during this unprecedented time. Because of the complexity of these benefits we would like to offer a brief summary of each to bring some clarity to what may be available for you. As always it is best to confer with your CPA or attorney prior to making any moves that have the potential to financially impact your business.

  1. Paycheck Protection Program:

What is it?

A (partially) forgivable loan program offered through the Small Business Administration.

Who can benefit?

Businesses, including sole proprietorships, that have fewer than 500 employees

What are the benefits?

Small business loans up to a maximum of the lesser of $10 million, or 2.5 times the average monthly payroll costs over the previous year (excluding annual compensation of amounts over $100,000 per person)

 What can the loan be used for (eligible expenses)?

  • Payroll costs
  • Group health insurance premiums and other healthcare costs
  • Salaries and/or commissions
  • Rent
  • Mortgage interest (excluding amounts pre-paid)
  • Utilities
  • Other business interest incurred prior to February 15, 2020
  • Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs

How is the loan forgiven?

  • The amount eligible to be forgiven is based on eligible expenses incurred after the first 8 weeks from when the loan is made.
  • The business must maintain the same number of employees (equivalents) in the eight weeks following the date of origination of the loan as it did from either February 15, 2019 through June 30, 2019, or from January 1, 2020 through February 29, 2020.
  • Any debt forgiven pursuant to this provision is not included in taxable income for the year

How do I apply?

  • Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating
  • For more information on how to apply please click here To be connected to the Small Business Administration website.


  1. Employee Retention Credit:

What is it?

A payroll tax credit for businesses

Who can benefit?

  • Businesses whose operations have been fully or partially suspended during a quarter either as a result of a governmental authority or in which revenue in 2020 is less than 50% of the revenue from the same quarter in 2019.
  • Businesses who are not receiving a covered (7a) loan. from the Small Business Association. This would include the Paycheck Protection Program loan.

What are the benefits?

  • The credit is equal to 50% of wages paid to each employee, up to a maximum of $10,000 of wages per employee.
  • For small businesses (100 or fewer employees), all wages (up to the $10,000 maximum limit per employee) are eligible to count towards the credit
  • Wages include qualified health care expenses allocable to those wages.


  1. Payroll Tax Deferral

What is it?

Deferral of payroll taxes

Who can benefit?

Businesses and Self-Employed persons who have not had debt forgiven by the CARES Act. This would exclude businesses that received the Paycheck Protection Program loans and had any portion of that loan forgiven.

What are the benefits?

  • As mentioned above, Businesses are eligible to defer payroll taxes from the date of enactment, through the end of the year.
  • 50% of the payroll taxes that would otherwise be due during this period may be deferred until December 31, 2021. The remaining 50% is due on December 31, 2022.


  1. Net Operating Loss Rules

What is it?

Adjustment to Net Operating Loss Carry Back and Offset Rules

Who can benefit?

Corporations (Other than REITS)

Taxpayers with business losses

What are the benefits?

  • Allowance for any Net Operating Loss from 2018,2019, or 2020 to be carried back up to five years rather than the 2 years that was previously allowed
  • Allowances for offsets have been increased from 80% of taxable income to 100% of taxable income
  • Cumulative loss limits for taxpayers with business losses are removed for 2018, 2019, and 2020


  1. Traditional SBA Loans

 What are they?

  • 7(a) loans
  • Economic Injury Disaster Loans (EIDL)

Who can benefit?

7(a) Loan Qualifications:

  • Operate on a for-profit basis;
  • A physical location and operations in the United States;
  • Operate in any industry, other than as an ineligible business;
  • Investment by the business owner of time or money; and
  • Exhaustion of all other financing options.

EIDL Loan Qualifications:

  • A disaster declaration must have been issued for the area in which the business is located; and
  • The business must have incurred economic injury as a result of such disaster.
  • EIDL borrowers are required to:
    • Prove that they are not able to obtain credit elsewhere;
    • Have a credit history acceptable to the SBA; and
    • Show the ability to repay all loans.

What are the benefits?

7(a) Loan Benefits:

  • Loans up to $5,000,000
  • Terms up to 10 years
  • Collateral is required
  • SBA guarantees up to 85% of the loan amount

EIDL Loan Benefits:

  • Loans up to $2,000,000
  • Terms up to 30 years
  • Interest Rates of 3.75% for for-profit entities, and 2.75% for non-profit entities

How do I apply?

For more information on how to apply please click here  To be connected to the Small Business Administration website.


In short, there are many benefits available to businesses during this time. It is our hope that this information is both encouraging and practical for you during such a trying time for so many businesses.

If you have any questions or would like to speak with me directly about the CARES Act and how it may benefit your business please feel free to contact me directly at [email protected] or by phone at 985.727.0770.

Thank you and God Bless