Small businesses are hurting right now (said Captain Obvious). Here are a few resources and some real-life suggestions.
The Small Business Administration is offering four forms of assistance through its Coronavirus Relief Options initiative. Two are available to businesses without a pre-existing relationship with the SBA, and two are for businesses that already work with the SBA.
Let’s look at the first two mentioned. The Paycheck Protection Program (PPP) is available, in general, to any small business that meets SBA’s size standards (typically fewer than 500 employees, although that varies by industry), some nonprofits, businesses in accommodations and food services, sole proprietors, independent contractors, and the self-employed.
The intent of the PPP is to enable business owners to cover payroll expenses for themselves and their employees, as well as cover some overhead expenses. According to SBA.gov:
“The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.”
Business owners apply for the PPP loan via participating banks and credit unions. The government is looking at expanding lenders to include the Community Development Financial Institutions Fund and fintech.
IRL, finding a lender that is participating in the PPP can be challenging. Some larger banks have already met their self-established capacities for participation. If you are having trouble locating a lender, you can reach out to your local office of the SBA and ask for guidance on finding qualified, participating lenders. Pro hints: it behooves you to work with a lender who is fully automated to reduce lag time in receiving the money you’re applying for. And don’t share your information with any institution that is not a qualified provider of the PPP.
The second source of money is the Economic Injury Disaster Loan Emergency Advance (EIDL). This funding is available for many of the same entities that are eligible for the PPP, and is applied for via the SBA website.
Good news about the EIDL: according to SBA.gov, the loan advance does not need to be repaid:
“The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.”
The EIDL loan advance is up to $10,000, but is pro-rated based on the number of employees in the business. For example, for a business with one employee, the loan advance that will be forgiven is approximately $1,000. And keep in mind that the $10,000 loan advance is part of a larger loan that will require repayment, albeit at a very low interest rate.
The PPP and the EIDL are complementary, not exclusive, meaning you can apply for both. You can’t use the funds for the same things, however, and you’ll want to make sure to document that.
The other two components of the SBA’s Coronavirus Relief Options package are SBA Express Bridge Loans and SBA Debt Relief. Please see the SBA.gov website for more information on those.
What have your experiences been with these programs? Please share the good, the bad, and the ugly with your sister members of The F Project.
We’ll get through this together. Stay healthy, sane, and safe!