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CARES Act: Financial Relief for Small Businesses

Stormy double rainbow over Honolulu a sign of relief to come for Hawaii businesses during COVID-19

Signed into law on March 27, 2020, the $2-trillion-dollar Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, aims to help small businesses keep people employed during the economic onslaught of COVID-19.

This article provides an overview of key provisions of the CARES Act most relevant for business owners, including the Payroll Protection Plan (PPP) and Economic Injury Disaster Loan (EIDL) programs. Additionally, you’ll find information on alternative financing options like the Employee Retention Tax Credit, debt relief for existing SBA borrowers, and tax options.

The laws aimed at helping small businesses survive this pandemic are rapidly changing. Be sure to consult with your business advisor or counsel before taking any actions based on the information contained within this article.

CARES Act at a Glance

From mandatory closures to a statewide lockdown, the COVID-19 pandemic has created lingering uncertainty and stress for many Hawaii businesses. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) aims to alleviate some of the pain.

The CARES Act is the single largest relief bill in U.S. history and is providing more than $2 trillion in financial aid to individuals and businesses in various areas and industries.

Included in the CARES Act:

  • $500 billion in loans for distressed companies (expanded lending for businesses)
  • $377 billion in small business loans
  • $260 billion in unemployment insurance
  • $250 billion in direct payments to eligible taxpayers (individuals and families)
  • $150 billion for local and state governments
  • $150 billion for local hospital equipment and infrastructure


Paycheck Protection Program

With more than $659 billion allocated in two rounds of funding for emergency loans to small businesses, the Paycheck Protection Program (PPP) is the largest section of the CARES Act.

The loans may be forgiven if used to cover payroll, most mortgage interest, rent, and utilities amid current economic uncertainty related to coronavirus.

Key points about the PPP loans for eligible employers:

    • Up to $10 million available in federally backed, zero-fee loans.
    • Covers up to 24 weeks of funding.
    • Requires no collateral or personal guarantees.
    • Will have the same terms regardless of borrower or lender.

According to the U.S. Department of Treasury, loan forgiveness is based on the monies being used at least 60% for payroll, including benefits, which must be maintained at normal levels. Forgiveness decreases if jobs and salaries are reduced but may be adjusted if employees are rehired. (Source PDF)

SBA Economic Injury Disaster Loan (EIDL) & Emergency Grant

The CARES Act also temporarily expands eligibility for SBA Economic Injury Disaster Loans to provide a fast, emergency advance of up to $10,000 to small businesses and private non-profits.

However, the Emergency Grant advance was later revised to $1,000 per employee, up to 10,000, with processing times backlogged for weeks. (Source)

To access the advance, you have to first apply for an EIDL and then request the advance within three days of applying, according to guidance by local accounting firm KKDLY LLC. The advance may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent, and mortgage payments.

EIDLs can be used to pay for expenses that would have been incurred had the disaster not happened, including payroll and other operating expenses. Loans of up to $2 million over 30 years were available and the advance did not have to be repaid, even if the EIDL loan request was denied.

You can apply for both an EIDL grant and Paycheck Protection Program loan. The EIDL grant would have been subtracted from the amount of the Paycheck Protection loan that is forgivable

Employee Retention Tax Credit

All businesses (small or large) that retain workers during the COVID-19 pandemic may be eligible for a refundable payroll tax credit. Employers affected by COVID-19 may claim a refundable tax credit against the employer portion of payroll tax equal to 50% of certain wages paid to an employee between March 13, 2020 through the end of the year.

Only $10,000 of wages can be taken into account for any employee and the Employee Retention Tax Credit is not available if the employer takes an SBA Paycheck Protection loan.

Businesses are eligible for an Employee Retention Tax Credit if operations have been fully or partially suspended as a result of a government order due to COVID-19, or if you have experienced a 50% decline in quarterly, gross receipts in 2020 when compared with the same quarter in 2019.

Debt Relief for New and Existing SBA Loan Borrowers

The SBA Debt Relief program will provide reprieve to small businesses who already have an SBA loan or take one out within six months after the CARES Act is enacted. The SBA will pay for all loan costs for borrowers, including principal, interest, and fees—for six months.

Under the new law, the SBA is directed to make payments within 30 days of the date on which the first payment is due (Source). Check with your lender or visit the Small Business Administration for more information about SBA loan programs.

Payroll Tax Delay

The CARES Act allows employers to delay their portion of payroll tax payments through the end of 2020. The deferred amount can be paid over the next two years. The ability to defer these taxes is not available if the employer takes an SBA Paycheck Protection Program loan. (Source, Source)

Additional Tax Benefits

The CARES Act allows for advancement tax credit payments and provides other forms of tax relief for businesses, including loosening requirements for net operating losses and limitations on business interest deductions.

More corporate tax relief information from U.S. Senator Brian Schatz of Hawaii.

Choose the Best Option for your Business

Each of these alternatives provide very generous tax subsidies to assist employers. However, it is critical that you carefully evaluate your eligibility for and the benefits of each of these options, since the amount of assistance provided by the federal government could vary greatly depending on which path you choose. We strongly recommend you consult your financial advisor or accountant.

For additional assistance, please reach out to your local Small Business Development Center or SBA District office.

For more information about tax issues, please check the IRS website at

This material is provided for informational purposes only. It is not intended to constitute legal advice, and reader should consult with their advisor or counsel before taking any actions based on the information contained within this material.

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