Senate Approves CARES Act: Important SBA Loan Information

Published: March 26, 2020

Late last night, the Senate unanimously approved the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which is set for a House vote on Friday. The legislation authorizes $349 billion for loans to be distributed under Small Business Administration’s 7(a) program. Some of the important information for small businesses is highlighted below:

  • Eligible businesses are those with 500 or fewer employees.
    • To be eligible, businesses must have been operational as of February 15, 2020.
    • Sole proprietors, independent contractors and self-employed individuals are also eligible to apply for the loans.
    • Exceptions apply for industries in which the SBA size standard allows more than 500 employees.
  • Small businesses may receive loans of up to $10 million under the new maximum loan amount.
    • Lenders will determine the proper loan amount by using a formula that takes into account past payroll expenses.
  • In addition to existing allowable uses, businesses may use the money from loans for payroll; paid sick, medical, or family leave; continuation of group health care benefits; mortgage, rent, and utility payments; and other debt.
  • Loan forgiveness is available to businesses that retain workers or rehire workers who were laid off.
    • Businesses will not have to repay loans used for payroll costs, interest payments on mortgages incurred before February 15, 2020, rent under a lease in force before February 15, 2020, and utilities for which service began prior to February 15, 2020.
    • Only payments made during the 8-week period beginning on the date of the origination of the loan will be forgiven.
    • The amount forgiven will decrease in proportion to a reduction in the number of employees.
  • Small businesses will be able to apply through banks, credit unions and other lenders.
    • Approximately 1,800 private lenders are already approved to issue 7(a) loans, and Treasury Secretary Steven Mnuchin stated that new regulations will make it possible for almost all FDIC-insured banks to make SBA loans.
  • Special terms include a maximum interest rate of 4%, no prepayment penalty, no personal or collateral guarantee requirement, and the ability to defer payments for six months to a year. The maximum term of the loan is 10 years.

The CARES Act also includes assistance for mid-sized businesses with between 500 and 10,000 employees. The Secretary of the Treasury will implement a program that provides financing to banks and other lenders that make direct loans to mid-sized businesses. The annual interest rate for these loans will not exceed 2% and no interest payments will be due for at least 6 months after a loan is made. The funds must be used to retain at least 90% of the workforce with full compensation and benefits until September 30, 2020. In addition, businesses seeking loans must not outsource or offshore jobs for the term of the loan plus 2 years after repayment, and may not issue dividends for up to a year after repayment.


For more information on this alert and its impact on your business, please call 405.235.4100

Keep up with our ongoing COVID-19 resources, guidance and updates at our RESOURCE CENTER.

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