CARES Act Expands Federal Small Business Loans, Can Support Aging Services

Regulation | March 30, 2020

This article provides a summary of the small business loan provisions included in the CARES Act and potential next steps for aging services providers. Loans will be available effective April 3. 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed on March 27 provided about $2 trillion in federal dollars in response to the COVID-19 pandemic. About $350 billion of these funds are directed to provide loans to small businesses, with opportunity for loan recipients to receive forgiveness and not have to repay the amount borrowed. On April 3, small entities including smaller 501(c)(3) not-for-profit organizations will be able to access these funds. On March 31, the U.S. Department of Treasury issued guidance for potential borrowers and for lenders.

This article provides a summary of the small business loan provisions included in the CARES Act, the Treasury guidance and potential next steps for aging services providers.

The Paycheck Protection Program 

The Paycheck Protection Program is the primary small business loan program in the CARES Act. Among eligible entities are 501(c)(3) organizations with fewer than 500 employees. In other word, not for profit aging services providers are able to receive these funds, provided they have 500 or fewer employees. This threshold includes all full- and part-time employees and those with other statuses (e.g., per diem/TAR). Not-for-profit entities seeking loans through this program are subject to SBA’s affiliation standards, which prospective borrowers should review in detail.

Small entities are allowed to borrow up to 250% of their average monthly payroll costs (averaging payroll costs for each month in the year preceding the loan date). If an adult day services provider, for example, had an average monthly payroll of $100,000, it could access up to $250,000 in loans through this program. Loan payments will be deferred for six months for any loan principal that is not forgiven (although interest will accrue). Certain payroll costs are excluded, including payroll taxes and compensation for higher wage employees. Up to 100% of the amount borrowed can be forgiven. Unlike other types of SBA loans, these loans do not require collateral, do not require a personal guarentee and borrowers do not need to first look elsewhere for funds. Loans can originate from April 3 through June  30.

Loans through this program are forgivable if a small entity maintains its payroll for 8 weeks after receiving the loan. Loans can be forgiven for funds used to cover payroll, rent, mortgage interest and utility bills. If an entity has already laid off staff, they could be eligible for forgiveness if they use loan funds to re-hire. If after 8 weeks payroll is maintained, the loan is forgiven. If a borrower has unforgiven loan principal (e.g., if an organization receives a loan but does not maintain its payroll), the interest rate for these loans will be 0.5% with a term of 2 years. Below is an excerpt from guidance for potential borrowers from the U.S. Department of Treasury on forgiveness criteria.

How much of my loan will be forgiven? You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

Potential borrowers should review the Treasury guidance for borrowers in full before proceeding with a loan application. 

Organizations interested in these loans should reach out to banks in their area. According to the Treasury guidance, borrowers can receive loans from "any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating" in the Paycheck Protection Program. As reference, Treasury also issued guidance on these loans for lenders

On March 31, SBA and Treasury posted the Paycheck Protection Program Application Form, which members may want to review in considering this opportunity. 

Some additional documents may be helpful for LeadingAge members as they consider next steps:

Economic Injury Disaster Loan                                          

In addition to the Paycheck Protection Program, SBA also expanded the Economic Injury Disaster Loan (EIDL) program, in which borrowers receive funds directly from SBA. These loans are generally not forgivable, but may carry a longer term and/or lower interest rate than the Paycheck Protection Program loans. For not-for-profit organizations, the interest rate for these loans is 2.75%. SBA set up a new website with a streamlined application, here: Some key items that must be included in this loan application include:

  • Gross Revenues for the Twelve (12) Month Prior to the Date of the Disaster (January 31, 2020)
  • Non-Profit Cost of Operation for the Twelve (12) Month Prior to the Date of the Disaster (January 31, 2020)
  • Number of Employees (As of January 31, 2020)
  • Date Business Established
  • Description of business activity (e.g., which services an organization provides)

Borrowers may also be eligible for a $10,000 emergency fund award that may be forgivable.

If an organization took out an EIDL previously and wants to pursue a Paycheck Protection Program loan to be eligible for loan forgiveness, they may be able to refinance the EIDL in consultation with their bank.


LeadingAge will continue to monitor the SBA loan programs and keep members apprised of key updates. Members are encouraged to visit and/or email questions or comments to