COVID-19 Aid: A Quick-Start Guide for Start-ups and Small Businesses

The Cane Angel Network is working to help small businesses and startups with the challenges presented by COVID-19 and widespread stay-at-home orders. The federal government’s recently enacted CARES Act provides small businesses with access to funds, a critical lifeline for struggling businesses. However, the process for applying for these funds can be intimidating so we have summarized and simplified them here. There is no fee to apply, and in some cases the funds do not need to be repaid.  We recommend you apply as soon as possible.  We will discuss the two main sources of relief funds here and address some of the other options in our next post. Below are the main components of the CARES Act:

Coronavirus Aid, Relief, and Economic Security (CARES) Act:
  1. Economic Injury Disaster Loan (EIDL)

  2. Paycheck Protection Program (PPP)

  3. Additional Financial Relief Options (to be covered in a later blog post):

    1. SBA Debt Relief

    2. Tax Return Extension

    3. Employee Retention Credit (ERC)

Check out the following to decide which relief plan is best for you:

Economic Injury Disaster Loan

The Economic Injury and Disaster Loan is designed to provide funds immediately to small businesses. It offers a small emergency loan option and a larger, longer-term option to keep your business running until the economy comes back. This loan applies to businesses, not individuals, and may take up to 2-3 weeks to be in your account. It would be better to apply now and set your business apart from competitors that fail to take advantage of the relief.

Note: The SBA strongly recommends that you print and complete the application first, then fully complete online to not be placed back at the end of the line.

  • Total $2 Trillion package backed by the U.S. Treasury
  • Applicable to small business with less than 500 employees
  • $10,000 immediate loan under the Emergency Advance option
    • Disbursed within 3 days
    • No repayment at all
  • Loans of up to $2,000,000
    • Up to a 30 year repayment plan
    • 75% rate for small businesses
    • 75% rate for non-profits
  • Small Business Administration (SBA) Documentation Requirements:
    • Credit history
    • Federal Income Tax Returns and IRS (Form 4506T)
    • Personal Financial Statement (SBA Form 413)
    • Schedule of Liabilities (SBA Form 413)
  • Applicable to U.S-based business entities, irrespective of owner citizenship

Where to apply: https://disasterloan.sba.gov/ela/

Paycheck Protection Program

The Paycheck Protection Program minimizes COVID-19’s impact by keeping employees on payroll, thereby decreasing layoffs. The PPP covers only employees and not contractors who must apply separately for relief funds. As long as your business provides the proper documentation, the government will grant you total forgiveness of the portion of the loan used in the first eight weeks for payroll. Loan forgiveness is also possible for a limited number of other expenses such as rent. This is a large incentive to keep employees on your payroll during these tough times.

  • Covers all wage, salary, benefits, tips, and other expenses
  • Amount of the Loan
    • 5X average of payroll in last 12 months
    • Maximum $100,000 salary per regular employee
    • Maximum of $10 million per business
  • Applicable to small businesses with less than 500 employees per location
  • Retroactive to payroll beginning February 15
  • Must be used within 8 weeks
  • 25% can be used on non-payroll expenses (rent, etc.)
  • Repayment:
    • 1% interest over 2 years
    • Begins within 6 to 12 months
    • Forgiven if payroll is maintained through the crisis
  • Where to apply
    • Best option: Through your own bank
    • Not recommended: SBA approved lender (search SBA.gov)

cares act flow chart

While the market landscape of today is vastly different than it was two months ago, small businesses can make it through this storm. As always, we must make smart decisions, plan for the future, and stay optimistic.

“History provides a crucial insight regarding market crises: they are inevitable, painful, and ultimately surmountable.” – Shelby M.C. Davis

For more information and frequently asked questions about the CARES Act, check out these other resources to get the most out of the CARES Act:

This page was written by Brian Galea, Farah Sheikh, and Jeffrey Camp.

Brian Galea is a full-time MBA student at the Miami Herbert Business School. His background is in Biology and Anatomy and he is currently pursuing a career in venture capital. He is dedicated to the entrepreneurial spirit and sustained growth of the startup community in his hometown of Miami.

Ms. Farah Sheikh will be completing her Juris Doctorate from the University of Miami’s School of Law in early May of 2020. While a Student Investment Team member of the ‘Cane Angel Network, Ms. Sheikh is also a current Student Fellow in the Startup Practicum under Professor Daniel Ravicher’s instruction of intellectual property, business entity formation, and dealing with business founders. Upon Ms. Sheikh earning her Law degree, she plans to pursue a career in entrepreneurship and investing.

Mr. Camp is the Managing Director of the Cane Angel Network.