Home / Economy / Articles / What do the CARES Act and the Paycheck Protection Program (PPP) mean for small businesses?

Of the $2 trillion distributed in the Coronavirus Aid, Relief, and Economic Security (CARES Act), $350 billion is dedicated to providing relief to small businesses, defined as having under 500 employees.

The $350 billion will be deployed through the Paycheck Protection Program, which allows small businesses to borrow up to 250% of their average monthly payroll expenses, up to a maximum loan amount of $10 million. The loans are intended to cover eight weeks of payroll expenses and additional payments toward debt, and will only cover employee compensation up to $100,000 per employee. Money from that loan paid toward payroll and existing interest payments on mortgages, rent payments, leases, and utility service agreements will be forgiven—i.e., will not need to be paid back (more information on the Paycheck Protection Program here). Small businesses can apply through most banks to receive a loan. The Senate is currently debating an additional $250 billion in support for the Paycheck Protection Program.

The government approved $30.2 billion in small business loans in 2019

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What does this $350 billion in lending look like in context? As of 2018, there were 30.2 million small businesses in the country. These small businesses employed 58.9 million employees or 47.5% of all employees. In 2019, the Small Business Administration (SBA) approved 100,000 loans for a total amount of $30.2 billion. The majority of the SBA’s lending is typically through 7(a) Loan Guarantees, a general set of loans that include the Standard 7(a) loan with a maximum of $5 million with a turnaround time of 5-10 business days and an express loan with a maximum amount of $350,000 made within 36 hours. In 2019, 7(a) Loan Guarantees amounted to $23.6 of the $30.2 billion in SBA lending.

For full analysis of the CARES Act and related recent legislation, see our recent article.