UPDATED April 27, 2020: For the latest information concerning coronavirus (COVID-19) resources available to small businesses, please visit the Small Business Administration website.NOTE: The information provided in this article is for informational purposes only, is general in nature, and is not intended to and should not be relied upon or construed as legal or financial advice or opinions. Please review the actual text of any law or program discussed in this article and consult with appropriate professionals as needed.
Small businesses — from restaurants and gyms to auto repairs and cleaning services — are essential to our nation’s economic success. But in this unparalleled time, these businesses are being directly affected by COVID-19 related social distancing and stay-at-home orders.
Many of our small business customers have already experienced a sudden slowdown in customers, subscriptions and foot traffic. As a result, many have had to lay off long-term employees, limit operating hours, and find creative ways to keep revenue flowing.
In response to this unprecedented pandemic, the federal government through the Small Business Administration (SBA) has a number of programs to help. To increase awareness for the small business community, we’ve outlined two of the new programs now available for short-term assistance and relief.
Be sure to pay attention to what qualifies as a “small business,” as many of these programs may apply to organizations with as many as 500 employees. And, while these two programs — the COVID-19 Economic Injury Disaster Loan and the Paycheck Protection Program — are separate, you might qualify for both.
COVID-19 ECONOMIC INJURY DISASTER LOAN
This loan program offers up to $2 million in assistance to small businesses to be used to pay fixed debts, payroll, accounts payable, and other bills that cannot be paid as a result of the disaster’s impact. While these loans have an interest rate of 3.75% for small businesses, they allow for long-term repayment to keep the payments affordable (up to a maximum of 30 years).
As part of this program, small businesses can also apply for an Economic Injury Disaster Loan Advance up to $10,000. This is intended to help cover expenses quickly and efficiently. Funds are being made available within three days of application approval so, they can be accessed and put to use quickly. Even better news — the advance may not have to be repaid.
The application (online only) is available at: https://covid19relief.sba.gov/#/.
- The interest rate is 3.75% for small businesses
- The interest rate for non-profits is 2.75%
- The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years
- Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay
Disaster Loan Advance Specifics:
- The amount is up to $10,000
- Funds will be made available within three days of a successful application
- This loan advance may not have to be repaid
Who Can Apply?
- Businesses with fewer than 500 employees, including cooperatives, tribal small business concerns, and employee stock ownership plans (ESOP)
- Businesses with more than 500 employees that are small under SBA Size Standards found at https://www.sba.gov/size-standards/
- Individuals who operate under a sole proprietorship, with or without employees, or as an independent contractor
- Businesses, including agricultural cooperatives, aquaculture enterprises, nurseries, or producer cooperatives, that are small under SBA Size Standards found at https://www.sba.gov/size-standards/
- Private non-profit organization that are non-governmental agencies or entities that currently have an effective ruling letter from the IRS granting tax exemption
For Questions and More Information:
- Contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or email firstname.lastname@example.org
PAYCHECK PROTECTION PROGRAM THROUGH THE CARES ACT
On Friday, March 27, 2020, The Coronavirus Aid, Relief and Economic Security (CARES) Act, a $2 trillion stimulus bill, was signed into law. The Paycheck Protection Program is the most important provision for most small businesses in this new federal COVID-19 stimulus bill. This new program sets aside $350 billion in government-backed loans from private banks that can, in some cases, be converted to grants, which means that if you meet the requirements you may not need to pay the loan back.
The program provides small businesses with funds to pay up to eight weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. Some of these funds can be “fully forgiven funds” if they are used for payroll costs, interest on mortgages, rent, and utilities. Keep in mind that due to likely high usage of these funds, at least 75% of the forgiven amount must have been used for payroll.
On these loans, payments will also be deferred for six months and no collateral or personal guarantees are required. It is important to keep in mind that you MUST keep employees on the payroll — or rehire quickly. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.
Who Can Apply?
- Any small business with fewer than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19
- Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries
- Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers (This means each store location could be eligible)
Unlike the COVID-19 Disaster Recovery Loan, the Paycheck Protection Program application must be done through a lender (most federally-insured institutions). Use this link to review the application and gather the information required. All loans will have the same terms regardless of lender or borrower. A list of participating lenders, as well as additional information, and full terms can be found at www.sba.gov.
More Information on Both Programs:
- U.S. Chamber of Commerce: https://www.uschamber.com/co/small-business-coronavirus
- SBA: https://www.sba.gov/disaster-assistance/coronavirus-covid-19
- U.S. Department of the Treasury: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses