Disclaimer: I am a business strategist, not an attorney or banker. As with any important transaction, make sure you receive professional advice to assess your risk.

For small business owners, today may mark one of the most important days in American history. The CARES Act has passed the Senate, and will pass the House either today or over the weekend.

Title 1 of the CARES Act includes the Paycheck Protection Program, which may impact many members who can pass the government’s standards for being impacted by COVID-19.

For those companies of less than 500 employees, the bill provides federally guaranteed loans for 250% of a company’s average monthly payroll which could be forgiven if a company were to maintain its payroll through June 30.

The program will cover payroll costs, paid sick leave, employee salaries, health insurance premiums, mortgage payments, and other debt obligations to provide immediate access to capital for small businesses who have been impacted by COVID-19. CARES also provides other substantial relief to small businesses, not listed in this post.

The implications of this stimulus are significant. It provides incentive for businesses to keep valuable employees through the crisis, even if their revenue and profit have been dramatically impacted.

Who qualifies:

  • Independent contractors
  • Small businesses with less than 500 employees
  • Sector 72 (under the U.S. NAICS coding system) businesses with less than 500 employees per location
  • 501-c3 nonprofit entities with less than 500 employees
  • Entities that meet the “size standard” for the industry as outlined by the administration


  • These SBA loans will be administered by over 800 qualified SBA banks. Large SBA lenders such as Chase and Wells Fargo expect to have online portals operable in the first half of April. Most applications will be completed online. There will be a run on these programs so make sure you have assembled your documentation in digital form in advance.

Other considerations:

  • While vague, the bill references applicants making “good faith” certifications that the loan is necessary. Existing SBA provisions assume companies have no other viable financing, but we wait with bated breath to see whether this interpretation will change. Check with your SBA lender to confirm that your existing credit line and/or other credit will not be considered as a basis for the forgiveness of your loan.
  • The loan limit is $10 million.
  • No personal guarantees will be required.
  • The maximum maturity of the loan is 10 years.
  • There are exclusions in the calculations based on employees earning $100k per year.
  • Payroll is calculated over the 12 months prior to the application period. There are other calculations for seasonal companies.
  • Employers can use loan proceeds to rehire employees they have already laid off.
  • If you use funds for other purposes or ones that are disallowed, funding will be treated as a low interest loan (around 4%).
  • Banks could be physically closed during “shelter in place”.
  • There are provisions to extend or refinance existing disaster delivery loans, although there is also language that suggests you can’t “double dip”.
  • Banks’ capital requirements will not be impacted by their participation.

I know we are all focused on the health and welfare of our employees and our families during this difficult time. I sense this stimulus, in concert with the massive infusion of capital into our markets by the Federal Reserve could mark a turning point in our economic crisis.

If you have questions, please feel free to contact me at marc@optimizeinc.net

To read the proposed legislation, see: “Coronavirus Aid, Relief, and Economic Security Act” (the CARES Act)

Marc Emmer is President of Optimize Inc., a California-based management consulting firm specializing in strategic planning. Marc has delivered over 300 talks for Vistage, and is a frequent contributor to the Vistage Research Center, Forbes and Inc.com.