CARES Act for Startups: Legacy Relief Programs and What Still Matters

Editor’s note (updated 2026): The major CARES Act relief programs discussed in this article (including PPP, the Employee Retention Credit, and EIDL) are no longer accepting new applications. We’ve kept this page as a historical and practical reference for founders who used these programs and still need to understand their documentation, tax, and due‑diligence impact.

What was the cares act?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was a large federal stimulus package created in 2020 in response to the COVID‑19 pandemic. It introduced several emergency relief programs for businesses, including many that directly affected venture‑backed startups.

For early‑stage companies, the CARES Act mainly showed up through:

• Paycheck Protection Program (PPP) loans.
• The Employee Retention Credit (ERC).
• Economic Injury Disaster Loans (EIDL) and related advances.
• Payroll tax deferrals and credits.

These programs are largely over, but the choices your startup made back then still live on in your financials, tax returns, and diligence conversations.

CARES Act Legacy Issues for Startups

Even though you cannot apply for new CARES Act relief in 2026, the programs continue to matter in three big ways:

• Due diligence: Investors and acquirers often ask for documentation of PPP loans, ERC claims, EIDL loans, and other relief you received. They want to confirm you were eligible, compliant, and properly accounted for these items.
• Tax and accounting: PPP forgiveness, ERC claims, and deferrals affected revenue, expenses, and payroll taxes in prior years. Your advisors may still be reconciling these items or amending returns.
• Government reviews: Some relief programs can be audited or reviewed years after the fact. Having clean records reduces the stress and cost of responding.

The rest of this article summarizes how the major CARES Act programs worked for startups and what you should keep in your permanent records.

Paycheck Protection Program (PPP) for Startups

PPP provided forgivable loans to help companies keep employees on payroll during the height of the pandemic. Many startups used PPP to cover salaries, benefits, rent, and utilities when revenue was uncertain or dropping.

Key points for founders:

• PPP loans were sized based on a multiple of average monthly payroll costs, subject to caps and eligibility rules.
• Forgiveness depended on spending the funds on qualifying costs and maintaining certain headcount and compensation levels.
• For venture‑backed startups, affiliation rules sometimes affected eligibility, especially for larger portfolios.

If your company received PPP funds, you should keep:

• Application and forgiveness documentation (as outlined in the PPP page).
• Evidence of how you calculated eligibility and loan size.
• Accounting and tax records showing how forgiveness was treated.

Employee Retention Credit (ERC)

The ERC was a refundable payroll tax credit designed to encourage employers to keep employees on payroll during periods of shutdown or significant revenue decline. Many startups either:

• Claimed ERC on original payroll tax filings, or
• Claimed ERC retroactively via amended payroll returns.

Key considerations:

• Eligibility was based on either government‑ordered suspensions of operations or significant declines in gross receipts, with different thresholds over time.
• PPP and ERC interacted. At different times, rules were updated to allow companies to benefit from both, but not on the same wages.
• ERC claims often involved detailed documentation and calculations that are important to keep for audit purposes.

Your ERC file should include:

• Eligibility analyses and any supporting documentation (e.g., revenue comparisons, shutdown orders, internal memos).
• Detailed wage allocation workpapers, especially if you also used PPP.
• Copies of original and amended payroll tax returns.
• Correspondence with your payroll provider and tax advisor.

Economic Injury Disaster Loans (EIDL) and Advances

EIDL loans and advances were another form of relief administered by the SBA. They typically offered low‑interest, long‑term loans to help businesses cover working capital needs.

For startups that received EIDL loans:

• Keep loan agreements, amortization schedules, and any security or collateral documents.
• Track covenants and reporting requirements, if any.
• Make sure your cap table, board minutes, and debt schedules reflect the existence of these loans.

EIDL advances (grants) do not need to be repaid, but they should still be documented and properly accounted for.

Payroll Tax Deferrals and Other Credits

The CARES Act and subsequent legislation allowed certain employers to defer payment of specific payroll taxes and introduced other targeted credits.

If your company deferred payroll taxes or used CARES‑related credits:

• Keep workpapers showing the amounts deferred, the periods involved, and the schedule for repayment.
• Ensure your payroll provider reports and tax returns match your internal records.
• Confirm that all required repayments have been made and properly recorded.

This information is particularly important in diligence, where buyers want to know there are no hidden payroll tax liabilities.

How To Organize CARES records

To make your life easier in future financings or exits, pull all CARES‑era relief into a single, well‑organized folder in your permanent corporate records. A simple structure might look like:

• /CARES‑Relief
  • /PPP
  • /ERC
  • /EIDL
  • /Payroll‑Tax‑Deferrals

Inside each folder, include:

• Applications and approval notices.
• Calculations and eligibility analyses.
• Correspondence with lenders, payroll providers, and advisors.
• Accounting and tax workpapers and relevant pages from filed returns.

Add a short index or README that explains, in a few paragraphs, what relief you received and where to find the key documents.

CARES Relief and Due Diligence

From a founder’s perspective, the main goal is to avoid surprises during diligence. When a VC, strategic buyer, or auditor asks about COVID‑era relief, you want to be able to answer confidently and quickly.

Expect questions like:

• Did you receive PPP, ERC, EIDL, or other CARES‑related relief?
• How much, and in what periods did it affect your financials?
• How do you know you were eligible?
• How did you account for forgiveness, credits, or deferrals?
• Do you have documentation to support your positions?

If your records are organized and aligned with your books and returns, these questions are straightforward. If not, diligence can slow down or raise unnecessary red flags.

How Kruze Consulting Can Help

Kruze works with hundreds of venture‑backed startups, many of which used CARES‑era relief programs. We help founders:

• Reconstruct and organize PPP, ERC, EIDL, and other relief documentation.
• Confirm that financial statements and tax returns reflect these programs correctly.
• Prepare clean, easy‑to‑review packages for investors and buyers.

If you need a CARES‑era cleanup or want a second set of eyes on your relief records before a financing or acquisition, contact the Kruze team and we can talk through next steps.