COVID economic stimulus plan includes $377B in small-business support provisions

WASHINGTON — The $2 trillion COVID-19 economic stimulus package passed by Congress this week includes $377 billion in funding to support small businesses, including provisions to provide zero-fee loans of up to $10 million and expedited processing of SBA economic injury disaster loans.

"American small businesses are facing an existential threat," Sen. Ben Cardin, D-Md., said. "The unprecedented public health measures cities and states have taken to slow the spread of the COVID-19, while necessary to protect public health, are having a tremendous impact on small businesses in every community in America."

Mr. Cardin, the ranking member of the Senate Small Business Committee and a senior member of the Senate Finance Committee, led a bipartisan effort to ensure small business interests were included in the recovery legislation. His counterparts were Sen. Marco Rubio, R-Fla., the Small Business Committee Chairman; Sen. Susan Collins, R-Maine, chair of the Senate Aging Committee; and Jeanne Shaheen, D-N.H., ranking member of the Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies.

"Congress has a duty to ensure that America's 30 million small businesses, and the 60 million people they employ, are not forced to bear the financial costs of keeping our communities safe on their own," Mr Cardin said.

The stimulus legislation is known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Among the specifics:

The stimulus includes nearly $350 billion in funding for a provision to create a Paycheck Protection Program (PPP) that will provide small businesses and other entities with zero-fee loans of up to $10 million. The program will be administered through the U.S. Small Business Administration (SBA) and the Department of Treasury.

According to the bill's language, up to eight weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels. Principal and interest are deferred for up to a year and all borrower fees are waived.

This temporary emergency assistance can be used in coordination with other COVID-financing assistance established in the bill or any other existing SBA loan program, the senators said.

The bill requires the SBA Administrator to set a cap on how much a bank can earn to process loan applications and prioritize underserved borrowers, including those in rural communities, minorities, women and veterans.

The stimulus also includes $10 billion in funding for a provision to provide an advance of $10,000 to small businesses and nonprofits that apply for an SBA economic injury disaster loan (EIDL) within three days of applying for the loan.

EIDLs are loans of up to $2 million that carry interest rates up to 3.75% for companies and up to 2.75% for nonprofits, as well as principal and interest deferment for up to four years. The loans may be used to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses, the senators said.

The EIDL grant does not need to be repaid, even if the grantee subsequently is denied an EIDL, and may be used to provide paid sick leave to employees, maintaining payroll, meet increased production costs due to supply-chain disruptions or pay business obligations, including debts, rent and mortgage payments.

Eligible grant recipients must have been in operation on Jan. 31, 2020. The grant is available to small businesses, private nonprofits, sole proprietors and independent contractors, tribal businesses, as well as cooperatives and employee-owned businesses.

A business that receives an EIDL between Jan. 31 and June 30, 2020, as a result of a COVID-19 disaster declaration is eligible to apply for a PPP loan or the business may refinance their EIDL into a PPP loan. In either case, the emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven in the Paycheck Protection Plan.

The bill also provides $562 million to ensure that SBA has the resources to provide Economic Injury Disaster Loans (EIDL) to businesses that need financial support.

The stimulus includes $17 billion in funding for a provision to provide immediate relief to small businesses with standard SBA 7(a), 504, or microloans.

Under this provision, SBA will cover all loan payments for existing SBA borrowers, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out an SBA loan within six months after President Trump signs the bill.

The measure also encourages banks to provide further relief to small business borrowers by allowing them to extend the duration of existing loans beyond existing limits; and enables small business lenders to assist more new and existing borrowers by providing a temporary extension on certain reporting requirements.

While SBA borrowers are receiving the six-month debt relief, they may apply for a PPP loan that provides capital to keep their employees on the job. The six months of SBA payment relief may not be applied to payments on PPP loans.

The stimulus also includes a permanent fix that allows the SBA to waive fees for veterans and their spouses in the 7(a) Express Loan Program, regardless of the federal budget. Under current law, SBA may waive fees only on 7(a) Express loans to veterans when the federal budget does not project a cost above zero for the overall 7(a) loan program.