Coronavirus and Beyond: CARES Act Stimulus Package Includes Business Loans To Cover Payroll

March 30, 2020

In the midst of the coronavirus (COVD-19) pandemic, Congress has been swift to enact new legislation aimed at helping individuals, families, and businesses during this unprecedented time—including The Families First Coronavirus Response Act and The Emergency Family and Medical Leave Expansion Act. Now comes The CARES Act.

The latest—and most monumental—legislation was signed into law Friday afternoon (March 27). The CARES Act is a wide-sweeping stimulus package estimated at $2.2 trillion that provides small businesses and nonprofits almost $350 billion in partially forgivable loans, as well as $500 billion in support for hard-hit industries and a ban on corporate stock buybacks.

Passed through Congress with near-universal support, some notable aspects of the bill include:

  • Appropriates direct payments to individuals
  • Provides resources to overburdened health care providers
  • Establishes subsidized loans, grants, and tax breaks to businesses facing extinction

Clocking in at 880 pages, The CARES Act is extensive and consists of several different sections covering a variety of topics. So for this blog, we will focus only on those sections regarding business relief, particularly ones relating to payroll.

As part of Netchex’s newly released COVID-19 Response Portal, our clients can now accurately gather the required information in time to process applications via a newly created custom report within the Netchex system. Learn more about Netchex’s new COVID-19 Response Portal here.

Paycheck Protection Loans

In the most significant section for business, The CARES Act allows small and medium-sized businesses to receive federal loans—in some cases forgivable—to cover payroll expenses. These new paycheck protection loans are administered by the Small Business Administration (SBA) to help employers continue to cover payroll costs and other expenses during the COVID-19 crisis. The covered period for these loans is February 15, 2020 through June 30, 2020.

Who is eligible?

Paycheck Protection Loans are available for businesses with less than 500 employees. However, hospitality businesses (those with a NAICS Code of 72) are eligible for this loan as well, as long as they employ 500 employees or less per physical location. For example, a restaurant franchisee with 3,000 employees (but no more than 500 employees at any one location) could qualify for the loans.

Lenders will determine eligibility for the loans based on whether the business was operational as of February 15, 2020, had employees on payroll, and paid wages and payroll taxes.

What can the loans be used for?

These loans are permitted to be used for payroll costs, as well other business-related expenses, including healthcare, rent, utilities, and other incurred debts. These loans cannot be used for leave payments made following the new Families First Coronavirus Response Act (FFCRA). Reimbursement for those leave payments is made through the tax credit process enacted as part of that legislation.

What’s the loan process?

Previously guaranteed only at 85%, paycheck protection loans are now fully guaranteed by the federal government through December 31, 2020. The standard Small Business Act fees are waived and the loans are not required to be personally guaranteed by the borrower. Loans will be available immediately through SBA-certified lenders, which include banks, credit unions, and other financial institutions. The deadline to apply for paycheck protection loans is June 30, 2020.

Employee Retention Tax Credit

Additionally, the CARES Act outlines a new employee retention tax credit, which is not available to employers that receive the previously discussed small business paycheck protection loans. 

This tax credit provides eligible employers with a refundable payroll tax credit for 50% of the wages paid by employers during the COVID-19 crisis. The tax credit is provided for the first $10,000 of compensation (including health benefits) paid to an eligible employee and is based on qualified wages paid to the employee. It applies to wages paid between March 13, 2020 and the end of the year. 

This tax credit is available to employers whose operations were fully or partially suspended due to a COVID-19 related shut-down order — or — gross receipts declined by more than 50% when compared to the same quarter in the previous year. 

Payroll Tax Holiday

In order to assist employers with immediate cash-flow issues, the CARES Act also allows employers defer payment of their portion of Social Security taxes they would otherwise be obligated to pay. Any deferred payroll taxes would be required to be paid over the next two years—with half of the owed amount being required to be paid by December 31, 2021 and the remaining half by December 31, 2022.

For more information on the intricacies of The CARES Act as it pertains to business, please check out a detailed blog from Fisher Phillips, a leading labor and employment law firm and a trusted partner of Netchex: https://www.fisherphillips.com/resources-alerts-cares-act-stimulus-will-permit-business-loans

Netchex remains fully operational through this unprecedented time. Our staff is hard at work for businesses like yours that are working diligently to remain in operation, adapt their policies, and ensure the safety of their employees. Netchex is here to help you accomplish all of this and more. Please visit our continually updating library of coronavirus resources.


Netchex is the leading HCM partner helping you improve workforce management and optimizing benefits for your employees. Our powerful, yet user-friendly technology simplifies the business of HR and bring self-service features to your company to provide more independence for your team.

Talk to us to find out how to put Netchex to work for your company. Take a look at our full suite of HCM solutions that grow with your business, including payroll, compliance, HR, benefits administration, and time & attendance, backed by experts and the best technology in the industry.