Congress Increases Relief Funding with Paycheck Protection Program and Health Care Enhancement Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economy Security Act (CARES Act) was signed into law. The legislation is the third stimulus package enacted to deal with the COVID-19 pandemic, and contains more than $2 trillion of stimulus and relief measures to help individuals and small business impacted by the COVID-19 pandemic. This includes the Paycheck Protection Program, access to other small business loans and grants, higher unemployment benefits, tax relief and student debt relief.

In response to the quick depletion of funds from the Paycheck Protection Program and the inability for many applicants to access relief, on April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act (the “Enhancement Act”) became law.

This interim emergency relief legislation pumped an additional $484 billion in new funding to COVID-19 relief programs established under the CARES Act, such as small business administration loan programs, financial assistance for hospitals and healthcare providers and coronavirus testing.

Here’s a breakdown of how the money will be spent:

$310 billion to revive the Paycheck Protection Program

The new law replenishes funding for the Paycheck Protection Program (PPP), a key coronavirus relief program. PPP loans are primarily intended to help businesses continue to pay employees during coronavirus closures. The PPP rules indicate companies may borrow up to $10 million to cover eight weeks of payroll and other expenses.

The loans are processed through the Small Business Administration, and are particularly attractive because PPP rules allow amounts borrowed to be forgiven if at least 75% of the proceeds are used to cover the cost of payroll for keeping and rehiring employees. Otherwise, the loan comes with a 1% interest rate and must be repaid within two years.

$60 billion to renew the Economic Injury Disaster Loan program

The Enhancement Act also provides additional funding for the Economic Injury Disaster Loan (EIDL) program. The EIDL program has two components. The first is a loan program which provides eligible small businesses and nonprofits that are experiencing temporary difficulties related to COVID-19, with up to $2 million in loans for working capital.

The money can be used to reduce debt, meet payroll and pay bills. EIDLs have interest rates of 4% or less and have maturities of up to 30 years. The second component is the EIDL emergency advance grant program, which provides loan advances of up to $10,000 per business that lost revenue from the pandemic.

It only applies to businesses with less than 500 employees, but these advance loans are actually grants that don’t have to be repaid.

$75 billion to recover lost revenue at hospitals

The CARES Act established the “Provider Relief Fund” to deliver financial support for hospitals and healthcare providers that have been negatively affected by COVID-19. The Fund is administered by the U.S. Department of Health and Human Services. The CARES Act contributed $100 billion to the fund, and the Enhancement Act injected an additional $75 billion.

$25 billion for COVID-19 testing

The “Public Health and Social Services Emergency Fund” received $25 billion through the Enhancement Act to increase testing and contact tracing capabilities. The Enhancement Act provides over $14 billion to the federal government for testing.

The remaining $11 billion of the fund is earmarked for states, localities, tribes and other organizations to fund development, administration, purchase, processing and analysis of COVID-19 tests for their jurisdictions. Assets from the Fund are distributed by the Health Resources and Services Administration.

Millennium Trust is committed to helping small businesses understand their options during these challenging economic times.

Learn more about loan assistance at sba.gov.

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The material in this blog is presented for general informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not offer or sell investments or provide investment, legal or tax advice.