What is the Definition of a Small Business Under the CARES Act?

The Coronavirus Aid, Relief and Economic Security (CARES) Act is a package of measures approved by the federal government in response to the COVID-19 pandemic. It provides immediate assistance to small businesses with non-disaster SBA loans, in particular 7(a), 504 and microloans. The CARES Act expanded the definition of small business under the SBA and increased the loan amounts available to each qualifying business. So, what is the definition of a small business under the CARES Act? Companies with up to 500 employees or that meet the size standard applicable to the industry, as provided for in existing SBA regulations, are eligible for assistance.

To check if your company is considered small, you will need the 6-digit North American Industrial Classification System (NAICS) code and an average annual income of 3 years. The main feature of small business aid under the CARES Act is in the form of forgivable loans and emergency grants, as well as relief from existing loans for small businesses. To request an Economic Injury Disaster Loan (EIDL) online or to check the status of your application, visit the SBA website. You must first apply for an EIDL and then apply for the advance.

Disaster loans are not eligible (see the “Economic Disaster Loans and Emergency Economic Disaster Grants” section above). Apply for a type 7(a) loan with a mission-based bank or lender. Apply for a 504 loan through a certified development company, which is a non-profit corporation that promotes economic development. Apply for microcredit through mission-based lenders who can also provide business advice.

The SBA has a free referral service tool called Lender Match to help you find a lender near you. The “credit elsewhere” test ensures that assistance is available only to small businesses that can't get credit elsewhere. These grants will help these companies with education, training and advice on how to access and request resources provided by the SBA and other federal resources related to access to capital and business resilience; the hazards and prevention of the transmission of COVID-19 and other communicable diseases; the potential effects of COVID-19 on supply chains, the distribution and sale of small business products and the mitigation of those effects; and other risk management practices. PPP can help small businesses cover employee salaries, other payroll costs, mortgage interest, rent, utilities, and interest on other debt obligations while supporting the economic impact of COVID-19. More small business lending guidance and resources can be found on the SBA website. The SBA also provides local assistance through district offices and resource partners. To manage the economic impacts of the COVID-19 pandemic, businesses should evaluate any existing credit agreements (including loans, lines of credit, credit agreements, etc.). An eligible company applying for a loan must certify that (the uncertainty of current economic conditions makes its loan request necessary to support the company's ongoing operations); (the funds will be used to retain workers and maintain payroll, or make mortgage, lease and utility payments); and (the company) does not receive duplicate funding for the same uses as other SBA programs.