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 phuminski@thoriumwealth.com with any questions.