The speed and severity of the sweeping economic disruptions caused by the COVID-19 pandemic have created an unprecedented demand for financial assistance by small to medium-sized businesses. Businesses with fewer than 500 employees account for 48% of jobs in America and 43.5% of GDP. Most of these businesses do not have enough available cash to withstand the financial strain of ongoing expenses with reduced or no revenue for a prolonged period. The Coronavirus Aid, Relief and Economic Security Act (the CARES Act) provides financial assistance for these businesses that are experiencing economic hardships caused by the COVID-19 pandemic. Targeting these businesses, the CARES Act established the Paycheck Protection Program (PPP) and expanded the Economic Injury Disaster Loan (EIDL). The CARES Act also provided the Treasury with $454 billion to make loans, loan guarantees and other investments in Federal Reserve programs and facilities that will give support to eligible businesses, States and municipalities. To that end, the Federal Reserve started the Main Street Loan Programs.

The PPP allows for government guarantees of loans to small businesses by lenders approved by the Small Business Administration (SBA). The CARES Act originally allotted $349 billion to fund the PPP program with an additional $310 billion added about a month later. The loans are intended to cover eight weeks of payroll, along with some utility and rent costs, up to a maximum of $10 million. These loans will be forgiven if businesses keep employees on payroll, maintain certain employee salaries and use at least 75% of the proceeds for payroll costs, and the other 25% for certain specified expenses. While the PPP loans have been compared to free money, it is more accurate to describe them as conditional grants.

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