‘PaySimple built our business by breaking down the complicated world of payments into something our customers find easy to understand and easy to use. We’ve applied this skill to the financial tools the US government, through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, made available to U.S. small businesses.

This article provides high-level information about government programs available to small businesses, including sole proprietors, independent contractors, and the self-employed. Before taking advantage of any of these programs, we strongly encourage you to dig into the details provided in the linked supporting materials and to consult your accountant and/or your attorney to be sure you fully understand the implications of each program for your business specifically.

Security Note: The government stimulus programs are a great opportunity for small businesses to get help during the Covid-19 pandemic and economic slowdown. Unfortunately, Covid-19 scams currently abound—many designed to perpetuate the disclosure of personal information and bank account information to wrongful actors. This is why it is important to use only official sites when submitting applications or getting information. A list of useful official sites is provided at the end of this guide.

  1. Do I Qualify for SBA CARES Act Loan Programs?

If you’re self-employed, an independent contractor, or a sole proprietor; yes.  If you are a small business owner (LLC, C-Corp, S-Corp, etc.) and you employ fewer than 500 people; typically, yes for all SBA loan programs.  Many non-profits also qualify (you likely know who you are already), and some larger businesses may also qualify as “small” under SBA guidelines.  If you’re not sure about your business, use the SBA Size Standards Tool to figure it out. (You’ll need to NAICS business category code to use the tool. You can find it here.) 

Paycheck Protection Program (PPP)

As part of the CARES Act, $349 billion was designated for the Paycheck Protection Program (PPP) which is a hybrid loan/grant program designed to help small businesses continue operations during what is expected to be the worst of the COVID-19 economic slowdown. This program isn’t quite free money; but it can be if your business uses the funds exclusively for the purposes designated.

Update 6/5/2020—Changes to PPP: On June 5, 2020 the Paycheck Protection Program Flexibility Act was signed into law. This new law extends from 8 to 24 weeks the time small businesses have to spend the money. It also enables 40% of the loan (as opposed to the earlier 25%) to be forgiven if spent on operating costs like rent and utilities (as opposed to salaries). It provides a longer time period for the unforgiven piece of the loan to be repaid and provides added flexibility for forgiveness if the small business owner can show that it was unable to return to pre-COVID staffing levels. Additionally, PPP participants can now take advantage of the payroll tax deferrals available to all businesses (prior to this legislation PPP participants were not permitted to take advantage of those deferrals).

Update 4/24/2020—New Funds for PPP: On April 24, 2020 an additional $310 billion was allocated to the Paycheck Protection Program, and applications will again be accepted by participating lending institutions. If you haven’t yet applied, there is still a chance for you to obtain a loan for your business, but act quickly because the new funds are not expected to last for long.

PPP Loan Basics

If your business qualifies for an SBA loan (see above), you’ll qualify for a PPP Loan if you were in business prior to February 15, 2020 and can attest to being harmed by the federally declared Covid-19 disaster between February 15, 2020 and December 31, 2020. And, unlike some SBA loan programs, you do not need to prove that you are unable to obtain loans elsewhere. Additionally, PPP loans all have a 100% guarantee by the SBA, require no collateral or personal guarantees, and do not have fees payable to the SBA. Other notable PPP Loan Features:

Eligible Expenses for which PPP funds may be forgiven:

PPP Loan Forgiveness

The main goal of the PPP is to keep small businesses operating and to keep small business employees working. To do that they are offering forgiveness of PPP loans if the funds are used for that purpose. (You can still qualify for and obtain a PPP loan if you use the funds for a non-forgivable expense; you’ll just have to pay it back.)

Requirements for Loan Forgiveness:

TIP: The best way to ensure that you get maximum forgiveness for your loan is to use at least 60% of the funds for payroll costs (the more the better), and to keep staffing levels the same or higher than they were before you obtained the loan.

Calculating Average Monthly Payroll

The amount of your PPP loan is calculated as 2.5 x your monthly payroll or $10M, whichever is less. That sounds simple but calculating that all-important monthly payroll amount can be complicated.

For sole proprietors and independent contractors, the basic calculation is:
Your total income from 2019 divided by 12 or $8,333.33, whichever is less.
(This is because any income over $100,000 per year is excluded from the calculation).

For small businesses with employees or contractors, the calculation at its very simplest is:
Average Monthly Payroll = (2019 Payroll Cost) – (Excluded 2019 Payroll Costs)/12

Allowable Payroll Costs Include:

Excluded Payroll Costs Include:

The calculation changes for seasonal businesses and businesses that started in 2020, and there are some additional allowable and excluded costs that apply to a minority of businesses. The US Chamber of Commerce guide provides all of the details along with excellent instructions on how to calculate your average monthly payroll costs.

How to Apply for a PPP Loan

To apply for a PPP loan, simply contact a participating lender and complete its application, which will most likely be online. You’ll need to provide your Average Monthly Payroll calculation amount, along with some supporting documents (which may differ by bank).

All lenders currently approved to offer SBA loans will be able to offer PPP loans if they wish to participate in the program. Additionally, any federally insured depository institution, federally insured credit union, and Farm Credit System institution may opt to participate in the PPP program. Over the next few weeks the Treasury Department and SBA with be working with other regulated lenders to approve them for participation in the PPP program.

If you have an existing SBA loan of any type, your first stop for a PPP loan should be with that lender. Your next stop should be your bank, which will likely be participating. 

NOTE: Your best bet for a PPP loan may be a small bank. $30 billion from the new PPP appropriation is designated for the smallest lenders (community financial institutions, small banks, and small credit unions with under $10 billion in assets), and another $30 billion for small lenders with between $10 and $50 billion in assets. So, if you’re having trouble applying with your big bank, thinking small and local may help.

The 100 top SBA Lenders through December 31, 2019 are listed here. You can also contact your local SBA Office for assistance in finding a participating lender. Use the SBA map tool and select the type of office you want to contact.

The SBA has released a sample PPP loan application which you can download here. It will give you an idea of the type of information that will be requested, though it may be slightly different for each lender.

PPP Loan Resources

Economic Injury Disaster Loans and Loan Advance (EIDL)

The SBA has now started taking new applications for EIDL Loans and Advances. Apply here.

Update 4/27/20— New Funds for EIDL Loans and Advances: On April 24, 2020 an additional $60 billion was allocated to the EIDL program. An additional $50 billion was allocated for the loans and an additional $10 billion for the advances. The SBA will begin processing their backlog of EIDL applications today. At this time they are not yet taking new applications, but they may when the pipeline clears. Check for the latest on the SBA website here.

The SBA’s Economic Injury Disaster Loan (EIDL) program provides small businesses with working capital loans of up to $2 million. The Covid-19 EIDL Advance provides small businesses up to a $10,000 loan advance that need never be paid back, even if the business is ultimately denied for the loan itself.

You can currently apply for an EIDL and the associated advance on the SBA website here.

This program is completely administered by the SBA, and if your application for the advance is successful you are supposed to get the advance funds within three business days, though in practice it is currently taking longer.

EIDL Program Basics

The EIDL program was established long before the Covid-19 situation arose. It is designed to help small businesses recover after a local disaster (think hurricane or tornado). The unique pandemic situation has led the President to declare a disaster for the entire country, making all eligible small businesses, independent contractors, and sole proprietors eligible for the loans. Additionally, specific to the Covid-19 disaster, these businesses are eligible for up to a $10,000 “advance” which since it never needs to be paid back can be considered a grant.

You should be aware of the following key EIDL program features:

Approved Uses for EIDL Funds

EIDL loads can be used for most core business functions.

Allowable EIDL Uses Include:

EIDL Prohibited Uses Include:

NOTE: You may apply for and receive both a PPP loan and an EIDL Advance, but any advance you receive will be deducted from the forgivable amount of your PPP loan.

How to Apply for an EIDL and Advance

The streamlined loan and advance application is available on the SBA website now. Apply Here.

Note that this application is specific to requesting the loan for the Covid-19 disaster, and that it is not applicable to EIDL applications related to any other disaster.

There are 4 sections to the application and depending on your business you may not need to complete them all. It will also be helpful to have your 2019 tax return available when you complete the application, as it will contain many of the data points you’ll need.

The following overview of each section will help you gather pertinent information prior to completing the form and will help you understand some of the questions asked. You will need to complete the application in a single sitting (no opportunity to save and come back later), so being prepared is important.

Section 1: Disclosures

Section 2: Business Information

Section 3: Business Owners Information

Section 4: Additional Information

After completing these four sections you’ll review a summary and submit the form. The SBA will then review it with qualified lenders, your credit score will likely be reviewed, you will likely be asked to provide additional documents in support of the loan. You will have an opportunity to review the terms of the loan you are offered prior to accepting it. And of course, if you are deemed eligible you’ll get the loan advance.

Remember, you may qualify for the advance but not a loan— either way you do not need to repay the advance.

Help for Small Businesses with Existing SBA Loans

The CARES act authorized the SBA to provide debit relief and expedited credit for small businesses that have active SBA loans and/or that are currently working with SBA lenders. These programs are designed to help small businesses weather the economic downturn and to put cash in their hands more quickly.

If you are not currently participating in an SBA loan program, this assistance will likely not be available to you in time to make a difference, so you should start with the PPP and EIDL programs. However, if you are currently working with an SBA lender, consider taking advantage of the following programs.

SBA Loan Debt Relief

The CARES act allocated $17 Billion to relieve small business of six months of payments on their non-disaster related SBA loans. That means if you have an existing eligible SBA loan, the SBA will cover all your loan-related expenses (including principal, interest, and fees), for six months.

If you apply for and are granted an eligible SBA loan on or after September 27, 2020 the SBA will also cover six months of your loan payments. However, as noted above, the loan application process can be lengthy, so unless you currently have a pending application you may not get your loan in time to take advantage of this program.

Eligible SBA Loans:

Additionally, unlike the PPP and EIDL loans, these SBA loans require that you prove your business cannot obtain a loan from any other source—something that may be easier now than before the crisis, but definitely an additional hurdle to consider.

To take advantage of this program, contact your SBA lender.

Deferment of Existing SBA Disaster Loans

The SBA loan debt relief program described in the previous section applies to many existing SBA loans, but not to disaster-related loans obtained prior to the CARES act being enacted. This deferment automatically applies to all such loans and means that all borrowers of home and business disaster loans do not need to make any payments through December 31, 2020 and that they will not incur any penalties as a result. You do not need to contact the SBA or your lender to request the deferment. By making this change, deferments through December 31, 2020, will be automatic. You will still have to pay the full loan amount, but you can delay your payments until 2021. Get more details about this program here.

SBA Express Bridge Loans

This program is only available to small business that already have a relationship with approved SBA Express lenders. (If you’re not sure if it applies to you, it probably doesn’t.)

The program is designed to get small amounts of emergency money into the hands of small business owners with a very small amount of paperwork while they wait for longer term funding to become available—most often the finalization of an Economic Injury Disaster Loan (see above) or a 7(a) loan.

The loans can be for up to $25,000 and may only be used to support the survival and/or reopening of a small business. These loans are fully guaranteed by the SBA, are available through any existing Express lender relationship, and must be paid back using EIDL funds after that loan is granted. If the pending SBA loan is not granted, the term of the bridge loan is no more than 7 years.

The Express Bridge Loan Pilot Program Guide provides full details about the program.

Contact your local SBA District office (which you can find via the SBA map tool ) to connect with an Express Bridge Loan Lender.

Small Business Tax Credits

The CARES act created a number of tax credits that may be used by businesses of any size. These can get complicated, and if you benefit from the other loan/grant programs outlined above you may not be eligible for these credits, so you should be sure to speak with you accountant about taking advantage of them. However, at a very high-level, here are the available tax breaks:

CARES Act Stimulus Payments

As a small business owner, you may also be eligible to receive a stimulus check as authorized by the CARES act. Remember that regardless of the business assistance you receive, if your income falls into the allowable range you will get the stimulus payment (based on being an individual taxpayer) too.

You’ve probably seen these numbers before, but just to recap:

According to an analysis from the Tax Foundation, “nearly all filers below the 80th percentile will receive a rebate, but only 0.1 percent of filers above the 99th percentile will receive a rebate due to the rebate phaseouts. The average rebate will be about $1,523, ranging from $1,436 for the 0 to 20th percentiles to $45 for the 95th to 99th percentiles.”

To see exactly how much you are likely to receive, you can use this calculator.

Another important point to note is that the final stimulus payment amount will be based on your 2020 AGI. So, if you don’t get an immediate stimulus check but your AGI falls into the applicable range for 2020 you’ll get a credit for the stimulus payment on your 2020 taxes. If your income rises above the allowable levels for 2020 (congratulations!) and you received a stimulus payment based on 2019 or 2018 AGI, you may have to pay it back on your 2020 taxes (how overpayments will be treated has not yet been finalized).

What You Can Do to Speed Your Payment

The CARES act allows the government to delay payments until the end of 2020. And, while all signs are that they don’t intend to do that, the easier you make it for the treasury to get you the money, the more quickly you’ll get it.

If you are due a payment, there are two things you can do to help get it more quickly.

Avoiding Stimulus Payment Scams

Even before the CARES Act was signed into law, criminals were using it as a basis for scamming people out of money and personal information. The scams come via email, SMS text, Robocalls, and even live callers offering “help” with applying for stimulus money (sometimes even requiring you to pay a processing fee) or asking to you to validate your identity in order to receive a payment. Other versions of scams direct you to a webpage, ostensibly to get more information, but instead install malware on your computer. The Better Business Bureau details some of the more prevalent scams here.

Remember, stimulus payments will be sent to you automatically—you don’t need to apply for them, validate your identity, pay a fee or do anything special to get them. Anyone claiming differently is not to be trusted and is likely trying to steal your money and/or your identity.

CARES Act Resources for Small Business

The following resources range from high-level overviews to very detailed program descriptions. Hopefully they will help you navigate your way through the assistance available for your small business during this Covid-19 crisis.


PaySimple is dedicated to helping all our small business customers succeed. That’s easy to say when times are good, but even more important to not only say, but also demonstrate, when times are hard. We hope this guide has done just that.

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