The U.S. Congress has passed the $2 trillion coronavirus relief bill, called the CARES Act, in addition to other financial measures enacted to help individuals and families. But what does it mean for you as a small business owner? Here are some answers, based on a comprehensive COVID-19 resource guide available from the National Association for the Self-Employed (NASE).
Under the CARES (Coronavirus Aid, Relief, and Economic Security) Act, small businesses, including sole proprietorships, LLCs, and corporations can apply for and receive loans through existing SBA lenders. The loans are available to help cover payroll for you and your employees. The financial assistance can also cover some expenses like rent and utilities.
The “Paycheck Protection Program,” as it’s known, can provide eight weeks of cash-flow assistance through loans that are 100 percent federally guaranteed. This program is retroactive to February 15, 2020, to encourage you to bring back workers who you may have already laid off due to the pandemic. Your aid will be approximately 2.5 times the amount of your monthly payroll amount based on 2019 payroll totals, up to $10 million.
Once your application is approved, you should get the proceeds within days. (However, hiccups in implementation have caused delays.) All payments on principal, interest, and fees are automatically deferred for six months. Also, if you retain your staff up until June 30, 2020, the loan will be forgiven.
Access the application form here.
Grants and other loans
Borrowers may apply for an Economic Injury Disaster Loan (EIDL) and request a working capital grant of up to $10,000. This is an emergency advance against an EIDL load. Approved borrowers should receive the funds within three days after applying.
Emergency advance funds can be used for payroll, materials, rent or mortgage payments, or other repayment obligations that cannot be met due to revenue losses from the COVID-19 pandemic. You can apply for this grant in addition to the loan under the Paycheck Protection Program, as long as you don’t use the loans for identical purposes.
The Small Business Administration (SBA) has information about the Paycheck Protection Program as well as EIDL grants and other financial assistance on a special web page they’ve established for the COVID-19 crisis. For example, the SBA can provide small businesses with working capital loans of up to $2 million under its existing emergency aid program for small businesses.
The SBA Debt Relief program can provide further relief by giving small businesses a reprieve on existing debts. Under this program, the SBA will pay the principal and interest of new 7(a) loans that were issued before September 27, 2020. Also, the SBA will cover the principal and interest for existing 7(a) loans for six months.
The SBA also administers the Express Bridge Loan Pilot Program. Small businesses that already have a business relationship with an SBA Express Lender can access up to $25,000 through a brief application. These loans can bridge the gap while you wait for other financial assistance to arrive.
Other benefits of the CARES Act
Business owners can enjoy other financial relief, too. The financial aid package also includes six months of relief for most student borrowers. If you qualify, your federal student loan payments will be suspended through September 30, 2020.
In addition, interest will not accrue during this time. Those who had student loans and were seeking forgiveness under the Public Service Loan Forgiveness (PSLF) program or income-driven repayment (IDR) program will receive credit toward PSLF for the period of suspension as though they had made on-time monthly payments.
Freelancers and independent contractors can also apply for unemployment aid through their state employment development agency. Though the online unemployment aid request is formatted differently in different states, you’ll most likely need to list yourself as your employer.
Unemployment aid isn’t just for those who lost all of their income. If you’re a freelancer or small business owner, you may have lost a portion of your income due to retainer clients letting you go or placing “pause” on the contract. Simply state the amount you lost and when that loss began.
Financial assistance on all fronts
Besides these benefits, you can also seek other relief during this crisis. Many companies are offering to defer mortgage, auto, credit card, personal loan, and student loan payments for 30 to 90 days. If you need this help, check with each of your creditors to see what they offer.
You may also find assistance from your local and state governments. Learn more about what’s available from your city and state by visiting their websites. They most likely have designated a page or section for pandemic-related assistance.
Get relief now
The time to act is now. Get your small business a much-needed prescription for continued financial health so you can sustain yourself, your employees, and your community through these challenging times.