Since the CDC confirmed the first US case of Covid-19 in January, small business owners, and those they employ, have found themselves taking increasing financial hits. Small businesses employ approximately 58.9 million Americans in the US, millions of which have been forced to reduce their business hours, temporarily close, or provide pared-down services to maintain local and state Covid-19 pandemic social distancing regulations. This means fewer hours and smaller paychecks for their employees, and a genuine threat of losing their businesses by the time they are allowed to reopen. However, small business owners may be able to find economic relief through local, state, and worldwide programs, as well as through the CARES Act—the $376 billion relief act signed into law on March 27th.
What is the CARES Act, and which businesses are entitled to relief?
According to bswllc.com, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, is the largest economic stimulus package in US history. Meant to address the economic fallout of the Covid-19 pandemic on the US economy, the CARES Act includes provisions to provide relief both to individuals and businesses. For business owners, there are three primary Covid-19 relief options offered by the US Small Business Administration through the CARES Act.
Economic Injury Disaster Loans Emergency Advance
In response to revenue loss due to the Covid-19 pandemic, small businesses can apply for an Economic Injury Disaster Loan (EIDL). But, in many cases, while their applications will be approved, the funds will come through too late. This program is aimed at giving business owners access to an advance of up to $10,000 on a pending EIDL.
In cases of a successful emergency advance application, funds are available within a few days. They can help businesses keep afloat until their full loan applications are approved, and they receive those funds. According to the webinar “Understanding the CARES Act: Small Business Loan and Grant Programs,” this loan advance will not have to be repaid by business owners. To qualify, businesses must have fewer than 500 employees. In some industries, businesses with more than 500 employees can also be eligible for this program.
Paycheck Protection Program
The Paycheck Protection Program, or PPP, provides small business owners with funds to keep paying their employees for up to eight weeks, including their benefits. Available through June 30th of this year, the program is set up as a loan with a two-year maturity and a 1% interest rate. However, businesses can qualify for loan forgiveness if the funds are used solely for payroll, rent, utilities, or mortgage interest. Additionally, 75% of the forgiven amount must have been used on payroll expenses. Businesses that qualify for the PPP include:
- Any small business that meets SBA’s size standards for their industry
- Sole proprietors
- Independent contractors
- Self-employed persons
- Accommodations and foodservice businesses with more than one physical location, and fewer than 500 employees per location
- Other businesses with more than 500 employees, if the business meets certain standards.
Businesses interested in the Paycheck Protection Program should note that, as of early April, the SBA has given out all of the nearly $350 billion set aside for the PPP. According to Inc.com, however, the Senate passed a measure on April 21st to provide the program with an additional $300 million. The house is expected to vote on, and pass, this measure on April 24th.
SBA Express Bridge Loans
Also designed to provide businesses a way to stay in business while an EIDL is pending, the SBA Express Bridge Loan offers businesses that already have a relationship with an SBA Express Lender access to emergency funds of up to $25,000. These funds can either be a term loan or used to “bridge the gap” while a business waits for approval of an EIDL application—hence the name. In the case of EIDLs, the amount is repaid from the EIDL funds, when they come through. To qualify for this relief program, businesses must have been open and operating when Covid-19 was declared a national emergency. Small businesses already working with SBA can apply for an Express Bridge Loan through March 13th, 2021.
Local and State Resources
The three economic relief options offered through the CARES Act are designed to help as many small businesses as possible. However, these options won’t help all small business owners. Some won’t qualify, while others will be eligible, but may find the amount they qualify for isn’t enough to keep them going. This is where local and state programs are stepping in.
Forbes has a state-by-state list of resources for small businesses looking for economic assistance. Currently, seventeen states are listed, with the story being updated regularly as more programs offer aid. For example, the Community and Economic Development Initiative in Kentucky responded to the Covid-19 pandemic by creating a small business stimulus fund. This local resource is awarding grants of up to $3,000 to small businesses. The only qualifying factor is being located in one of fourteen listed counties in Kentucky. On the state level, business owners in Louisiana can apply for the Louisiana Loan Portfolio Guaranty Program. With $50 million available, businesses can qualify for loans of up to $100,000, which they don’t have to begin paying back for six months.
Economic relief for business owners is also coming from unexpected sources. Facebook, for example, has pledged to spend $100 million assisting up to 30,000 small businesses in over thirty countries. Social marketing software provider Tailwind has taken a similar approach, creating the Tailwind Small Business Relief Program. Their program will offer $1 million to help small businesses anywhere in the world.
With so much uncertainty about when the country will be “back in business,” business owners are entitled to economic relief and encouraged to utilize it. It’s in the country’s best interest to keep small businesses from being forced to close their doors, as demonstrated by the CARES Act at the national level, the myriad of local and state relief programs, and even by customers still making efforts to patronize their favorite businesses.