CARES Act: Loan Applications

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law, and it includes significant relief provisions for small businesses. Our previous articles summarized the new Paycheck Protection Program (“PPP”) and the expansion of the Economic Injury Disaster Loan (“EIDL”) Program.

This client alert provides new information regarding PPP loan and EIDL applications. Given this subject’s urgency and the complexity of the CARES Act, this is simply a short summary to provide you a starting point for exploring relief which may be available to you. Check with your attorney at ECJ for the critical details governing any aspect of the CARES Act which may be helpful to you.

NOTE: Our banking sources report that the first wave of government money is scheduled to reach banks this Friday morning, April 3rd. We recommend that any borrower seeking these loans contact an authorized SBA lender now to have its application early in line for the first wave of funding.

Paycheck Protection Program

  • The Treasury Department has published an application form for the Paycheck Protection Program, which is available for download here.
  • The application should be completed and submitted to an SBA Participating Lender (under the CARES Act, the SBA can authorize additional lenders, so check with your bank).
  • Small businesses and sole proprietorships can formally apply for PPP loans starting Friday, April 3, 2020, and independent contractors and self-employed individuals can formally apply starting Friday, April 10, 2020.
  • While there are no underwriting requirements to speak of (no credit testing, etc.), the borrower must certify that: the loan is necessary due to the uncertainty of current economic conditions; it will use the funds to retain workers, maintain payroll, or make lease, mortgage, and utility payments; and it is not receiving duplicative funds for the same uses.
  • Pursuant to preliminary guidance issued by the Treasury Department, it is anticipated that a maximum of 25% of the forgiven amount may be for non-payroll costs.

Economic Injury Disaster Loan Program

  • The application for an EIDL is available here.
  • You can apply for an EIDL directly through the SBA.
  • Borrowers must have an acceptable credit history and ability to repay the loan, both as determined by the SBA. The SBA may approve based solely on credit score or may use alternative means, including requiring additional information.
  • Within 3 days of making an EIDL application, the SBA will pay eligible entities an emergency advance of up to $10,000, which does not have to be repaid regardless of approval of the application.

Ken Luer is the Chair of the Business & Corporate Law Department of Ervin Cohen & Jessup LLP andYasmin Azodi is an Associate in the Business & Corporate Law Department.