04/16 COVID-19 Update for Small Businesses

What the $2 Trillion CARES Act Means for Small Business Owners

It’s finally here — the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on Friday, March 27.

The legislation includes a number of business-boosting relief programs, the largest of which is the Small Business Association’s (SBA) Paycheck Protection Program or PPP.

As of Wednesday night (April 15), the SBA is reporting that 1,562,000 PPP applications have been approved, totaling over $329 billion.

The good news is that loan applications have officially been approved by the SBA, and money should be in the accounts of more than 1.5 million small business owners shortly.

One PPP loan tracker puts the total estimated loan disbursement figure at $16.4 billion as of Wednesday night. Stories have begun to emerge of small business owners receiving funds already, such as:

• A dental office in Iowa received $114,000 on April 13
• A snack food supplier in New Jersey received $83,700 on April 10
• A fitness equipment seller in Texas received $412,000 on April 10

Hopefully, if you’ve applied, money will be deposited into your business account in the coming days as approved loans are processed.

If you’d like to read up on these loans and other relief available through the $2 trillion CARES Act, continue reading…

The text of the bill can be read on the official Congress website right now.

Here’s what we know about how this will affect small businesses, and how to take action asap.

So far, reporting on the bill indicates that it includes:

• $349 billion for small business loans
• $50 billion for companies who retain employees on payroll to cover 50% of workers’ paychecks
• SSA payroll tax deferment (6.2%) for companies
• $500 billion in loans for larger distressed companies
• $130 billion for hospital funding
• $150 billion for state and local governments

The CARES Act primarily provides relief to small business owners through SBA loans.  There are essentially two types of loans. We created a helpful chart to breakdown each loan, their differences and what those differences might mean to you…

Click the image below to enlarge in a new tab.

The recently-passed CARES Act includes a number of business-boosting relief programs, the largest of which is the Paycheck Protection Program or PPP. The PPP portion of the CARES Act authorizes up to $349 billion for small businesses in the form of forgivable loans. These loans are designed give small business owners the means and motivation to avoid layoffs and continue paying workers directly. You are eligible for PPP if:

• You have less than 500 employees
• You’re a sole proprietorship
• You’re self employed
• You’re an independent contractor
• You’re a private nonprofit
• You’re a veterans organization
• You’re a tribal business (as described here)

Note: Self-employed individuals and independent contractors cannot apply until April 10, 2020. In brief, here are the highlights of PPP loans:

• Loans should amount to 8 weeks of payroll plus 25%
• $10 million is the maximum loan amount
• Loan payments can be deferred for 6 months
• The application window is April 3, 2020, through June 30, 2020
• Repayment is deferred for 6 months
• Loans are handled through lending institutions (not the government)
• The most you can borrow is 2.5x your average monthly payroll costs (up to $10 million)

Keep in mind that there are some provisions in PPP loans regarding your borrowable amount. These CANNOT be included when calculating how much you can borrow include:

• income taxes
• compensation for annual salaries exceeding $100,000
• compensation paid to employees residing outside the U.S.

Here are some VERY important facts about getting this loan forgiven:

• Loan forgiveness is tied foremost to maintaining full payroll
• Portions of the loan used for rent, utilities and mortgage interest can also be forgiven, but the total amount of those costs should be less than 25% of the total loan
• At least 75% of your loan must be used for payroll in order to be fully forgiven
• Forgiveness will be reduced if your workforce headcount declines or if salaries/wages decrease (compared to your pre-coronavirus expenses)
• The forgivable period lasts 8 weeks (starting from the date the loan is approved)

You should be able to apply for PPP through your current lender. Here is the list of PPP-approved institutions:

• And existing SBA 7(a) lender
• Any federally insured depository institution
• Any federally insured credit union
• And Farm Credit System institution that is participating

You can find currently eligible PPP lenders here.

Recently, nontraditional finance companies Paypal, Square and Intuit Quickbooks were approved as PPP lenders to distribute loans to small business owners. These companies will begin rolling out their own PPP lending programs and accepting applications shortly.

This approval comes as loan disbursement reportedly rises to $230 billion out of $350 billion available to small businesses nationwide.

If your bank is not currently offering the program, they may offer it at a later time as more institutions apply for approval and are enrolled in the program. If you’d like to get started on your application, you can download a sample form from the SBA here.

Helpful PPP links, websites and PDFs:

• From the U.S. Chamber of Commerce
• From the U.S. Department of Treasury 
• Inc. co-hosted a Small Business Town Hall with the U.S. Chamber of Commerce, which you can watch back here

Note: The Inc./U.S. Chamber of Commerce town halls have been extended into an ongoing series to discuss funding options available to small business owners. You can register for the next town hall and watch recordings of previous sessions here.

So, what can you do right now to ensure your small business benefits from this stimulus?

Contact your bank TODAY. Discuss your options.

The CARES Act also provides funding for another important source of relief for small business owners — Economic Injury Disaster Loans (EID Loans).

Unlike PPP loans, which are processed and delivered through established lending institutions, EID Loans are handled directly by the U.S. Treasury. Meaning you can apply online right now.

If you apply for an EID Loan, you will be given a $10,000 grant as an advance a few days after applying, and this grant does not have to be repaid — even if you are eventually denied the loan.

Again, the disaster loan cash advance is essentially a free grant. Money in your pocket that you don’t have to pay back.

You can apply for an EID Loan here.

Now, you may be wondering…

How will this bill affect my workers and other workers all over the country?

Here’s what we know about how this bill affects workers:

The bill includes relief for American workers in the form of $1,200 one-time payments to employees making less than $75,000, scaling down $5 for every $100 the taxpayer makes. Working parents are eligible to $500 in relief per dependent child. It’s being reported that relief payments are capped at $3,000.

In addition, unemployment benefits have been boosted and will include relief for gig economy workers like freelancers and independent contractors who are not employed full time by a single employer. Examples of gig economy workers include Uber drivers and delivery service drivers.