Congress and the President have recently enacted a piece of legislation, the CARES Act, to help America’s small businesses mitigate the effects of the current COVID-19 pandemic. In total, the CARES Act offers over $350 billion in support.
With all this talk of government assistance, a common question I’m hearing from a lot of small businesses in the region is, “How can we access that money?”
This blog will inform you of the different aid programs and resources available and give you tips on how to apply for financial aid.
Paycheck Protection Program
This CARES Act program can help your business receive loans to help you cover paid sick leave, payroll shortages, and expenses stemming from group healthcare benefits (mortgage payments, salaries, and any other debt obligations).
The Paycheck Protection Program (PPP) is meant to incentivize businesses with less than 500 employees to keep all their employees on the payroll for at least eight weeks. If you can do this, then the SBA will forgive loans received through this program. Otherwise, this loan has a maturity of two years and an interest rate of 1%.
Economic Injury Disaster Loans
The Economic Injury Disaster Loans (EIDL) program is a longstanding government program designed to help small businesses who have been hit with economic injury. This loan program can provide your business with up to $2 million of financial aid. The amount of assistance given is determined by the scale of economic injury your business has suffered.
Note: While you can apply for both the Paycheck Protection and Economic Injury Disaster Loans programs, it’s important to know that you can’t combine these two loans to pay for the same expenses. For example, you can’t combine both loans to cover rent and insurance. Instead, you must use one for rent and the other for other insurance.
Economic Injury Disaster Loan Advance
In response to the COVID-19 crisis, the CARES Act has enabled small business owners to apply for an Economic Injury Disaster Loan Advance of up to $10,000. And while the SBA has traditionally not considered lost revenue to qualify you for economic injury, this loan advance program changes that and is specifically tailored to help businesses recover from a temporary loss of revenue. This loan advance will not have to be repaid.
To apply for a COVID-19 Economic Injury Disaster Loan and loan advance, click here.
Before committing to a loan, it’s always important to speak with your attorney or accountant about the implications it will have on your business, credit score, and tax filings. Other things to consider include:
Are you a small business?
You must have under 500 employees in order to qualify for these loans. Nonprofits, freelancers, and sole proprietorships also qualify.
Interest rates on EIDL loans
While the $10,000 advance will not need to be repaid, the rest of your EIDL loan will need to be paid back. For small businesses, the interest rate is 3.75% and payment is automatically deferred for the first year (though interest will still be accruing).
Remember to track your expenses
If you secure a PPP loan, you must track your expenses for 8 weeks and then submit your records to the lender for review. Your lender will determine which portion of your loan was used for expenses and convert those portions of the loan into a grant — which you don’t have to repay. To secure the maximum forgiveness, keep careful records of how you spend your loan.
Apply for assistance
If you’ve been affected by the COVID-19 crisis, then these programs are here for you. Speak with your attorney and accountant to ensure you secure the best loan amount for your business, and apply for your low-interest PPP or EIDL loans here.
As a company that works with dozens of small businesses around the United States, the team here at Fannit is acutely aware of how the current crisis has affected this sector of the business world. Our hearts go out to each person affected by this pandemic and we are doing our best to work with and support businesses affected during this time.
Together, we can get through this difficult time.