Small businesses in the United States have been devastated by the global coronavirus pandemic.
Record numbers of businesses are closing on a (hopefully) temporary basis, but more and more business owners are reporting that they may have to close their business forever because of the economic uncertainty in front of us.
Thankfully though, the United States government has been able to put aside a lot of its partisan behavior of the last few years and work together to make sure that small business owners are getting the Covid 19 relief and funding that they need.
The Coronavirus Aid Relief and Economic Security (CARES) act set aside $350 billion initially, with another nearly $350 billion added in the middle of April, to help small businesses directly.
The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) solutions are just some of the answers that the government has implemented, and both of them have started to have positive impacts throughout our economy already.
Below we dig a little deeper into the ins and outs you’ll want to understand of both these programs, as well as a couple of other SBA lending opportunities you might want to take advantage of as a small business owner.
Paycheck Protection Program 101
A major part of the CARES Act legislation, the PPP lending available for small businesses is one of the largest relief bills ever passed by the U.S. Congress.
Technically designated as a loan, the government has been very open, very honest, and very transparent about the fact that if you retain ALL of your employees on your payroll for at least eight weeks – and the money used through the funding is paid towards expenses for your business – your loan will be forgiven from top to bottom.
Yes, you are reading that correctly.
The rules state that you have to use (at minimum) 75% of your funds towards payroll and payroll expenses, with 25% of the loan eligible to go towards other business expenses.
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As long as you adhere to the rules established by the PPP you won’t ever have to pay a single penny of this loan back to the government, regardless of how much you are able to borrow.
There are a number of rules and restrictions regarding who is able to apply and get approved for these kinds of loans, and applications opened on April 3 and are available through June 30, 2020. More information regarding eligibility can be found on the SBA website as well as application information and details.
As of right now, the PPP Act provides for loans that can be valued at 2.5 times your typical monthly payroll costs – provided those costs do not exceed $10 million a month.
Economic Injury Disaster Loan 101
The Economic Injury Disaster Loan (EIDL) program is set up through the SBA directly, providing small business owners with an opportunity to take advantage of upwards of $2 million in cash and capital through this lending platform.
As part of these disaster relief loans, entrepreneurs will receive a $10,000 upfront advance that does not ever have to be repaid – with the only stipulation being that you show you are experiencing some sort of financial difficulties directly related to the coronavirus pandemic.
Every single business in the United States with fewer than five hundred employees operating within the 50 states of our nation are able to apply directly for this kind of lending package. Sole proprietors, self-employed individuals, and independent contractors are able to qualify as well.
SBA Loan Options to Consider
On top of those two major coronavirus relief packages, the SBA has also been directed to offer a variety of loans and financing solutions to small business owners throughout the United States.
The SBA Express Cambridge Loan program has the opportunity to provide upwards of $25,000 to small business owners that have a working relationship with SBA approved Express Lenders already.
These kinds of loans can be taken advantage of and standalone term loan programs, but also operate as bridge loans while small business owners look to take advantage of the new EIDL lending program. These kinds of loans are fantastic for cash flow and short-term loan solutions.
Remember though that these loans will have to be repaid (unlike the two we highlighted earlier) – unless you’re using it as part of a bridge loan while you wait for approval with the EIDL set up.
SBA Debt Relief is also available through the US Small Business Administration. This organization has amended its policy in offering different types of lending solutions, with the following inclusions being the main updates:
- The SBA will immediately and continuously pay principal, interest, and fees of current 7(a), 504, and microloans over the next six months
- The SBA will also immediately and continuously pay principal, interest, and fees for all brand-new 7(a), 504, and microloans that are applied for approved, and issued before late September 2020
- The SBA is also deferring loans automatically for all lending packages that were classified as “regular servicing” on or prior to March 1, 2020
It is nice to see the government and private lenders banding together to find ways to help us all get through the coronavirus as best we can, shoring up and securing the financial future of our small business owners – the lifeblood, backbone, and heartbeat of our American economy.