The Archives at the Factory

Is Your Business Taking Full Advantage of The CARES Act?

Nearly every small business—3 out of 4—say they are being negatively affected by COVID-19 in some way. Given the unprecedented reach of the virus, and the reaction too it, that statistic is hardly surprising. But the attempts to help business owners are unprecedented, too. By now, you’ve heard about the $2 trillion stimulus package, called the Coronavirus Aid, Relief, and Economic Security (or CARES) Act. But your focus may have been one of its most popular provisions: the Paycheck Protection Program. However, the CARES act did more to help business owners.

Paycheck Protection Program

This provision is the most popular part of the CARES Act for a reason—it provides potentially forgivable loans to small business owners to help them get through the more acute phases of COVID-19 response. However, there were many issues with its roll out, which we won’t get into here.

What’s important on this front is persistence. Just because you didn’t receive funds in the first round of PPP, doesn’t mean you won’t still qualify in the future. To prepare for this possibility, continue to apply for loans and make sure your bookkeeping and financial records are up to date. 

If PPP doesn’t work out, there are still options available, and this preparation will put you in a good spot. Moving forward, you still have options.

  • Economic Injury Disaster Loans (EIDL) Like PPP, the EIDL program was maxed out early on, but may still be an option. Congress has been applying additional funds, so staying prepared is important. For instance, as of this writing, applications were open to agricultural businesses. To better your chances of qualifying for this type of loan, try where possible to limit expenses and keep bringing in business.
  • Payroll Tax Credits If your business has been financially impacted by COVID-19, you may qualify for a payroll tax credit for up to 50% of salaries up to $10,000. The provision is meant to encourage employers to retain employees. To qualify, your business must be suspended by government order due to COVID-19 during the calendar quarter (partially or fully), OR your gross receipts must fall below 50% of the comparable quarter from 2019. 
  • Tax Deferral Federal tax deadlines have been pushed back for businesses as well as individuals. Specifically, employers can defer their employee tax deposit and payments through the end of the calendar year.
  • Traditional Small Business Association Loans 
  • Payment deferrals If you currently have loans and are experiencing a slow down you should call the bank and ask for a deferral on your loan payments. Every little bit helps when we are talking about survival. 

Not all of the relief provisions in the CARES act require you to borrow from a bank. You can also borrow from yourself, in the form of Coronavirus Related Distributions or CVDs. This part of the act allows you to borrow up to $1000,000 from a tax-advantaged retirement plan, like an IRA or 401(k) to help you weather the situation. Importantly: The government does not place restrictions on how you use the funds. As long as you repay the money within three years, there are no federal income tax consequences.

CVDs aren’t the only part of the CARES act focused on retirement accounts. The stimulus package also suspends required minimum distributions (RMDs) for 401(k)s, 403(b)s, 457(b)s and IRAs for 2020. Essentially, if you are 72 or older, you are not required to withdraw money from your plan in 2020 like you would be in a normal year. If you’re tempted to take these distributions anyway, remember that the prescribed RMD amount is calculated based on the stock market close in 2019. Since the market declined significantly in early 2020, withdrawing money based on the 2019 level would lead you to withdraw a much larger percentage of your nest egg than intended.

Ultimately, which provisions in the CARES act you choose to utilize depends on your unique business and personal circumstances. To discuss any of these options, or if you have questions about the big picture, my door is always open.

What You Need To Know About CARES Act SBA Loans

What you need to know about small business relief

Help is here. The CARES Act addressing the financial fallout from COVID-19 is now law. This is a massive piece of legislation: It runs 880 pages and accounts for more than $2 trillion dollars. There’s a lot to tackle in it, but the first thing I want to dissect is the loan relief program for nonprofits and small business owners. 

But before I say another thing: Contact your current banker today and ask them if they are participating in the SBA backed CARES loan program. If they aren’t, stop reading and call around to find a lender that is. Then schedule an appointment (virtual or phone) with a loan officer ASAP.

With that taken care of, here’s what you need to know about CARES going into that meeting:

  1. What does it say?

It provides loans to these organizations to help them through the period of time between February 15, 2020 to June 30, 2020. There is approximately $349B set aside for this program. No loan payments under this program are due for one year and no fees are included in the loan.

No collateral or personal guarantees will be required by board members, trustees, or owners. Normally in small business loans, an owner or board member has to sign a personal guarantee, making them personally responsible if the loan isn’t repaid. That isn’t the case here; these loans come with no personal risk for business owners or board members.

2. What businesses does the bill cover?

The bill includes churches, nonprofits, Christian schools that are 501c3s, and small businesses. It covers employers with up to 500 employees (500 people at one location*) are eligible. There are no restrictions on type on industry or location within the US.

3. What can I use the loan for?

Payroll costs

This includes: salary or wages; payments of cash tips to employees; vacation, parental, family, medical and sick leave; health benefits; retirement benefits; state and local taxes.
However, these costs are only covered up to $100K in salary or wages for each employee.

Group health insurance benefits, paid sick leave, medical and insurance premiums

Mortgage or rent payments


Interest on any other debt obligations that were incurred before the loan period**

4. How much can I borrow?

  • Total average monthly payroll costs for the preceding 12 months (March 2019 to February 2020) multiplied by 2.5


  • $10,000,000 if you are a brand new church plant church or organization, use average payroll costs for January and February 2020 multiplied by 2.5.

5. How do I qualify or prepare?

You must certify that you used (will use) the loan to support ongoing operations or use the funds to retain workers, maintain payroll, or make your mortgage, lease and/or utility payments.

6. What’s the catch? How do I pay this back?
You may not have to pay the loan back: The full amount can be forgiven if you meet a few parameters. The primary qualifier is employment; the loan is forgivable if you employed the same number of people during the loan period as you did last year. If you have fewer employees, you may have to repay part of the loan. If you’ve cut employee salaries by more than 25%, you must repay the loan.

Here’s how that all breaks down:

  • Full-Time Equivalent Employee (FTE) (as defined in section 45R(d)(2) of 11 the Internal Revenue Code of 1986)
  • The goal of this loan is for your 2020 FTEs to be equal to or greater than your 2019 FTEs. Essentially, they want you to have equal to or more employees from February. 15, 2020, to June 30, 2020, as you did last year from February 15, 2019, to June 30, 2019.

If you have (or will have) fewer employees in 2020 than in 2019, then you need to complete a calculation. Divide your average number of full-time employees (FTEs) during the COVID-19 window (February 15 – June 30) in 2020 by the average number of full-time employees you had during that same window in 2019.

Turn that number into a percentage, and the difference between that number and 100% is the amount of your loan you must pay back.

So, for example, if you have 18 full-time employees now but had 19 last year:


If you’re required to pay back all or part of your loan, the maturity period is 10 years. We currently do not know the interest rate of this loan but given that the repayment will be spread over 10 years, the church or nonprofit’s monthly payment to repay this loan will be very low.

As I mentioned earlier when I told you to call your banker, this program is backed by SBA, or the Small Business Administration. It’s important to ask right away whether your lender is participating, and if not, to find one that is.

I’ll be in touch with more details about how CARES may be able to help your business during this unprecedented period. As always, we’re here to help. Please contact our office (336) 310-4233 or with any questions.