Tips For Small Business Relief During The COVID-19 Crisis

April 17, 2020

It is no surprise that COVID-19, and government responses attempting to slow the pandemic, have had a devastating impact on the global economy. The unemployment rate in the U.S. is at an unprecedented high, with approximately 6.6 million Americans filing for unemployment in the first week of April alone. Shelter in place orders across the country have forced non-essential businesses to close their doors, prompting layoffs and payroll freezes for millions of people. While larger corporations may have the ability to allow employees to work from home, or continue to pay their employees during the quarantines, most small business owners (including sole proprietors and freelance workers) have limited ability to continue paying employees or meeting their overhead expenses. In response, the federal government passed a $2 trillion economic relief plan, including small business protections. This article compares the types of relief available to small businesses and tips on applying.

Types Of Relief Available

Payroll Protection 

●Relief Available: Up to $10 million for payroll and benefits at 1% interest rate on non-forgiven funds
●Collateral or Other Requirements: Varies by financial institution
●Forgiveness: Full forgiveness if the business maintains headcount for 8 weeks after disbursement/Partial forgiveness if businesses reduce their workforce by 25% or more
●Distribution Timing: Varies by financial institution

 

SBA Economic Injury Relief Loans

 
●Relief Available: Up to $2 million at 2.75% – 3.75% interest on non-forgiven funds for payroll, rent, utilities, and other overhead
●Collateral or Other Requirements: Personal guarantees required above $200,000.00
●Forgiveness: Up to $10,000.00 as a grant
●Distribution Timing: Funds disbursed within 3 days

 

SBA Express Bridge Loans

 
●Relief Available: $25,000 to cover businesses while PPL or EIRL applications are pending
●Collateral or Other Requirements: Must have a current relationship with SBA or SBA lenders
●Forgiveness: Loan to be repaid with PPL or EIRL funds
●Distribution Timing: Funds disbursed within 1-3 business days

 

Tips For Applying
Limited surveys regarding the application process indicate that the easiest way to secure a loan is to use the financial institution you already have accounts with. Many of the larger private banks, such as Wells Fargo, are only accepting applications from current customers. However, some smaller, or alternative institutions, such as  Kabbage and Northone, are lending to new customers. Below are our top tips for your application.

 
●Have all the information ready to go before you start applying. Each bank will have its own requirements, but in general, you should plan on having your tax returns from 2018 and 2019 available, as well as payroll summaries for January and February 2020.
●Set aside ample time to start and complete your application in one shot. The high traffic for online applications can cause server interruptions and glitches. Do not assume that if you step away from your computer your information will be saved where you left off. Customers are reporting about 1-2 hours to complete the process.
●Be prepared to wait up to a week before hearing whether or not the bank has approved your loan. As the number of applications increase, that time may increase as well.
●Once approved, make sure you understand any required certification or documentation to qualify for loan forgiveness. Make sure you carefully and accurately keep records to show how you used the money and submit that proof by any required deadline.
●Consult with a tax expert, financial advisor, or financial institution with any questions or concerns you may have for your own particular situation.

 

Things To Keep In Mind
Financial institutions are already reporting a higher than expected number of applications, prompting them to limit applications, add restrictions, or pause applications altogether. The federal government has indicated it will attempt to approve more funds for the economic relief package, however, when and if those funds will become available is uncertain. The SBA also announced on April 6, 2020, that Economic Injury Disaster Relief loans will be limited to $1,000 per employee. New restrictions and limitations are a direct result of the ongoing uncertainty of how long the shelter in place orders stay in effect. With rules changing every day, along with funds running low, the best thing you can do for your small business is to apply now. For more information on how and where to apply, business owners can find more information at sba.gov.