COVID-19 and Contracts:
The CARES Act and SBA Loans

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,247 reviews

Jump to Section

Need help with a legal contract?

Post Project Now

Post Your Project (It's Free)

Get Bids to Compare

 Hire Your Lawyer

Key Takeaways

  • Most businesses up to 500 employees are eligible for a loan under the CARES Act.
  • The amount a business can borrow is 2.5 times monthly payroll expenses up to $10 million.
  • Loan forgiveness is available for funds used toward payroll expenses within 8 weeks’ of receipt.

CARES Act

As we all know, the federal government recently enacted the Coronavirus Aid Relief and Economic Security (CARES) Act, providing emergency assistance the likes of which have never been seen to individuals and business impacted by the pandemic. While the individual distribution seems fairly straightforward and keyed toward an individual’s income, the government’s actions concerning their plans to help small-business owners needs further implementation through the Small Business Administration.

ContractsCounsel is pleased to provide a platform for small-business owners, sole proprietors, and anyone contemplating launching a start-up access to top legal talent. To that end, many of you may be curious to how the government’s recent measures might apply to you.

Paycheck Protection Plan.

While the name may be a little misleading, the Paycheck Protection Program provides up to $359 billion in loans through the Small Business Administration. The loans are subject to forgiveness under certain circumstances to eligible entities employing less than 500 people. Economists are therefore considering these payments to be more like grants or gifts rather than traditional loans.

The money cannot be used for any purpose. Instead, it can only be applied to payroll costs (wages, salary, paid-time office, health insurance premiums, etc.), rent, utilities, mortgage interest, and debt existing prior to the COVID-19 pandemic. Businesses, non-profit organizations, veterans’ groups, certain self-employed individuals, independent contractors, and sole proprietors will especially benefit from this program.

Maximum Amount Available.

The calculation of the maximum amount available under the CARES Act is tricky: it is the lesser amount of $10 million or the average monthly payroll cost times 2.5 plus any SBA Economic Injury Disaster Loans received after January 31, 2020.

Loans are available for up to a 10-year term (amortized) at 4% interest, with six months (and up to one year) deferral of principal and interest payments, providing significant cushion to small-business owners. They may also be eligible for forgiveness in the amount equal to the amount actually paid for payroll costs, salaries, benefits, rent, utilities and mortgage interest during the eight weeks following disbursement of the loan. To put it another way, if a small-business utilizes its loan immediately, it will be forgiven rather than subject to repayment. These forgiven loans are also excluded from taxable income.

How to Apply.

According to the CARES Act, the Small Business Administration must issue regulations within 15 days of enactment, meaning that it is possible that lenders could begin taking loan applications as soon as mid-April. ContractsCounsel expects that those regulations will provide additional guidance from the SBA about how to find a qualified lender. Nevertheless, those businesses who already have an SBA loan should contact their existing lender in order to potentially expedite the process.

Should I Apply?

It depends. Even the most well-thought-out business plan did not anticipate this level of economic volatility. Consult with an attorney and your tax professional to see if a CARES Act SBA loan is right for you, especially in terms of whether you anticipate using the loan quickly (and therefore avoiding repayment) or over the long-terms (therefore subject to modest interest and deferment).

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

View Rachael
Member Since:
October 28, 2021

Rachael D.

Attorney
Free Consultation
Get Free Proposal
New York
10 Yrs Experience
Licensed in NY
Touro Law

We help simplify every transaction and provide a superior level of customer service to create long lasting and trusted relationships with our clients. Our goal is to guide our clients with practical and zealous legal representation and eliminate the difficult nature of any legal transaction.

View Gamal
Member Since:
October 31, 2021

Gamal H.

Attorney
Free Consultation
Get Free Proposal
New York City
24 Yrs Experience
Licensed in NY
New York Law School

I am a commercial contracts attorney with twenty years of experience. I have represented major corporate clients including Amazon, Marvel, and Viacom as well as independent entertainment professionals and technology startups.

View Yoann E. A.
Member Since:
October 29, 2021

Yoann E. A. L.

Attorney
Free Consultation
Get Free Proposal
California
3 Yrs Experience
Licensed in CA
Concord Law School at Purdue University Global

For over 15 years, I accumulated both hands-on technical and business experience as an IT engineer and entrepreneur, enabling me to understand your challenges probably better than anyone else on the legal market! My California-based full-online practice focuses on: - Intellectual Property (Copyright / Trademarks) - Privacy / Data Protection - Commercial matters (e.g. service contracts) - Corporate (e.g. incorporation, restructuring)

View Melanie
Member Since:
October 31, 2021

Melanie C.

Business & Intellectual Property Attorney
Free Consultation
Get Free Proposal
NY/NJ
18 Yrs Experience
Licensed in NY
Emory University School of Law

Melanie Cunningham specializes in helping entrepreneurs remain creative and expansive by establishing the foundation of their business and protecting and maximizing their intellectual property. It’s her belief that entrepreneurs and micro and small business owners play a critical role in our communities, which propelled Melanie to return to private practice after more than a decade working for global financial institutions. Melanie’s practice is dedicated to delivering excellent legal support and protection to this vital, but an often underserved, community. Melanie credits her business training and the skills developed as a senior compliance officer with enabling her to help small business owners have a legally compliant business, while proactively advising clients during the growth process. She’s helped diverse entrepreneurs do business in a way that focuses more on collaboration than competition. Melanie has counseled small business owners in determining what is protection worthy (helping them obtain trademarks and copyrights) and making contact on their behalf in the case of infringement.

View ralph
Member Since:
October 31, 2021

ralph s.

Attorney
Free Consultation
Get Free Proposal
Gainesville FL
11 Yrs Experience
Licensed in DC, FL, MA
University of Florida Levin College of Law

Ralph graduated from University of Florida with his JD as well as an LLM in Comparative Law. He has a Master's in Law from Warsaw University , Poland (summa cum laude) and holds a diploma in English and European Law from Cambridge Board of Continuous Education. Ralph concentrates on business entity formation, both for profit and non profit and was trained in legal drafting. In his practice he primarily assists small to medium sized startups and writes tailor made contracts as he runs one of Florida disability non profits at the same time. T l Licensed. in Florida Massachusetts and Washington DC this attorney speaks Polish.

View Christopher
Member Since:
November 1, 2021

Christopher B.

Attorney
Free Consultation
Get Free Proposal
Charleston, SC
9 Yrs Experience
Licensed in SC
Charleston School of Law

Former litigator now focusing on transactional business work

View Rodrigo
Member Since:
November 2, 2021

Rodrigo M.

Attorney
Free Consultation
Get Free Proposal
Mexico City
11 Yrs Experience
Licensed in AK
Instituto Tecnologico Autonomo de Mexico

Mexican Lawyer specialized in Corporate, Fintech and Financial Law

View John
Member Since:
November 5, 2021

John P.

Attorney
Free Consultation
Get Free Proposal
Seattle, Washington
3 Yrs Experience
Licensed in WA
University of Akron

As a veteran software engineer from international blue chip corporations, I focus on legal aspects for regulated and technical businesses. My legal experience includes civil litigation, intellectual property guidance, and market competition, at both private practice as well as Federal and State institutions.

View Jessica
Member Since:
November 8, 2021

Jessica P.

Attorney
Free Consultation
Get Free Proposal
Safety Harbor, FL
2 Yrs Experience
Licensed in FL
Stetson University College of Law

Ms. Penovich partners with clients to overcome complex challenges and find innovative solutions. Ms. Penovich has served as General Counsel at J.W. Cole and an Adjunct Professor of Estate Planning at the MUMA College of Business at the University of South Florida. She is a member of the Florida Bar, and has over 15 years of progressive financial services experience developed at top-tier financial firms including Transamerica, Raymond James, and Citi.

View Josiah
Member Since:
November 9, 2021

Josiah Y.

Managing Shareholder of The Law Office of Josiah Young, PC
Free Consultation
Get Free Proposal
Sacramento, California
9 Yrs Experience
Licensed in CA, NY
American University Washington College of Law

Attorney licensed to practice in both California and New York, Josiah is focused on helping people understand what's in their contracts, and do business with confidence.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call