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Business Relief is Still Available under the CARES Act

by | Sep 30, 2021 | Employment Law

The Coronavirus Aid, Relief, and Economic Security Act, also called the CARES Act, has provided ongoing support to businesses experiencing fallout from the COVID-19 pandemic. The Paycheck Protection Program (PPP), which was the leading economic relief package established by the CARES Act, ended on May 31, 2021. However, there are several important benefits still available to businesses in other provisions of the Act.

PPP Loan Forgiveness

Although businesses may no longer apply for PPP loans, forgiveness for existing PPP loans is ongoing. Recent guidance from the Small Business Administration (SBA) states that existing borrowers can apply for forgiveness any time up to the maturity date of the PPP loan (two to five years, depending on date of loan application). However, if borrowers do not apply for forgiveness within 10 months after the last day of the 8- to 24-week covered period, then PPP loan payments are no longer deferred, and borrowers will have to begin making loan payments to their PPP lender.


Additionally, the COVID Economic Injury Disaster Loan (EIDL) program is active through December 31, 2021.Unlike PPP loans, EIDL loans are not forgivable, but they provide a fixed interest rate of 3.75% on a 30-year term and 2.75% for private nonprofit organizations. Borrowers will not have to begin repayments until two years after the date of loan origination. Moreover, the maximum loan amount will increase from $500,000 to $2 million on October 8, 2020.  Even if borrowers have previously obtained an EIDL loan, they may request an increase up to the $2 million cap.

Generally speaking, businesses are eligible for EIDLs if (1) they are physically located in the United States, (2) suffered working capital losses due to the coronavirus pandemic, (3) employ 500 or less employees in the aggregate, and (4) were in operation on or before January 31, 2020. Borrowers may use EIDL funds to pay operating expenses, payroll, rent/mortgage, utilities, other ordinary business expenses, and business non-federal debt (including future debt) and regularly scheduled payments on federal debt.

Employee Retention Credit

Finally, the Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 2020, made several changes to the employee retention tax credits previously made available under the CARES Act, including modifying and extending the Employee Retention Credit (ERC) through December 31, 2021. The ERC is available to businesses (1) with 500 employees or less, (2) experienced a full or partial suspension of their business because of government orders, or the business’s revenue declined by 20% or more for any quarter this year compared to the same quarter in 2019, and (3) the employees were kept on the payroll.

For 2021, the ERC is a quarterly tax credit against the employer’s share of certain payroll taxes. The tax credit is 70% of the first $10,000 in wages per employee in each quarter of 2021, which means this credit is worth up to $7,000 per quarter and up to $28,000 per year, for each employee. If the amount of the tax credit for an employer is more than the amount of the employer’s share of those payroll taxes owed for a given quarter, the excess is refunded directly to them.

Importantly, the economic benefits provided by the CARES Act, including PPP loan forgiveness, the COVID EIDL program, and the Employee Retention Credit, are subject to changing rules, regulations, and guidance from the federal government. We recommend consulting with an experienced tax or legal professional before applying.