Student blog – The CARES Act: Lesser-known provisions may prove crucial lifelines for struggling small businesses

By Ranie Lin
Research Intern
McNair Center for Entrepreneurship and Economic Growth


After the passage of the Coronavirus Aid, Security, and Relief (CARES) Act in late March, significant attention was brought to provisions such as billions of dollars in Paycheck Protection Program (PPP) funding, which aimed to provide relief for small businesses. However, the CARES Act also included additional debt relief efforts through the Small Business Administration’s (SBA) loan programs. With Covid-19 cases continuing to rise in many parts of the country and some reopening plans being put on hold, a greater understanding of these relief efforts can help lessen the economic blow for small businesses.[1]

Relief for SBA borrowers

As part of its coronavirus relief efforts under the CARES Act, the SBA will pay six months of interest, principal and fees for all borrowers of current 7(a) and 504 loans, as well as new loans made prior to September 2020.[2]According to the SBA, the 7(a) loan program is the organization’s “primary program for providing financial assistance to small businesses” and provides funds for uses such as equipment or real estate that may be otherwise difficult to obtain.[3] Similarly, SBA 504 loans provide capital for small businesses under slightly different stipulations, such as additional stipulations on what the funds may be used for.

In mid-April, the SBA released a procedural notice outlining the full implementation terms of this program. Most importantly, the new relief program provides full payments, rather than merely a deferment, as well as eligibility for not only existing loans but also new loans disbursed between March 27 and September 27 of 2020.[4] Furthermore, borrowers who have already made their first monthly payments can have their payments returned, and loans that are currently on deferment will still be covered by the SBA.

According to Section 1112 of the CARES Act, a total of $17 billion was allocated to the SBA for these debt relief efforts.[5] While this amount pales in comparison to the over $520 billion in PPP funds that were allocated, the future of the PPP program, which was tentatively extended by 5 weeks in June, remains uncertain.[6] As consumer and business activity continues to suffer due to the spread of Covid-19, many small businesses will  need every bit of help that they can get.[7]