Which types of coronavirus relief can my small business get?
Small business owners, help is on the way—though the process of applying for funding may not be smooth. There are now several new temporary relief options aimed at helping small businesses push through the current economic headwinds caused by the coronavirus.
For instance, nearly $350 billion has been earmarked through the new Paycheck Protection Program to provide financial assistance to small business owners affected by the COVID-19 crisis. But the program experienced hiccups in its first few days, and it’s worth looking into additional options you may be eligible for, too.
Here’s what you need to know if you’re a small business owner looking for help.
What Small Business Funding Is Available?
There are four federal programs now open to businesses affected by the COVID-19 crisis:
- The Paycheck Protection Program: This new program provides forgivable loans of up to $10 million to help businesses (and not-for-profits) with 500 or fewer employees keep their workers on the payroll. The loan can cover expenses including wages, rent, mortgage interest and utilities. The program is administered by the U.S. Small Business Administration (SBA) and is available through June 30, 2020. Loans are issued through private banks and backed by the government.
- Economic Injury Disaster Loans (EIDL): Also administered by the SBA, these loans can provide up to $2 million to businesses with 500 or fewer employees for a loan term of up to 30 years. An advance of up to $10,000 is available to applicants, and it does not have to be repaid.
- SBA Express Bridge Loans: These loans are only available to those with an existing business relationship with an SBA lender. They can give businesses quick access to up to $25,000.
- SBA Debt Relief: For six months, the SBA will automatically pay the principal, interest and fees on current qualified loans and new qualified loans issued before Sept. 27, 2020. The SBA is also providing automatic deferments through Dec. 31, 2020 on any currently serviced disaster loans.
Applications and details for the SBA programs can be found on its coronavirus relief resource page. Below are answers to common questions about the types of funding your business can receive.
My business is open, but revenues are way down. What kind of relief can I get?
If you have 500 employees or fewer, and you’re planning to keep your workforce intact, the Paycheck Protection Program is a good choice. If you use the loan for qualifying expenses, which include eight weeks of payroll costs, mortgage interest, rent and utilities, your loan will be forgiven. If you use some of the money for other expenses, that portion of your loan will be due within two years at an interest rate of 1%.
In addition to the Paycheck Protection Program, you can also concurrently apply for an EIDL as long as you’re using the money from each type of loan for different purposes. An EIDL must be repaid, though you can apply for a $10,000 emergency cash advance. The advance does not have to be repaid if it’s spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or debt obligations that are unaffordable due to declining revenue.
What are my options if my business is currently closed?
If you want to restart payroll, you can apply for the same types of loans that an open business can apply for. Under the Paycheck Protection Program, you have until June 30 to rehire or restore salary levels for employees whose salaries or work status changed between February 15 and April 26 and still get forgiveness. If you rehire but reduce employee wages, you won’t be eligible for full loan forgiveness through the Paycheck Protection Program.
If you need help with non-payroll expenses, like rent, mortgage payments or other debt obligations, you may want to consider applying for the Economic Disaster Injury Loan, which can cover as much as $2 million in working capital at an interest rate of 3.75% for small businesses and 2.75% for nonprofits.
An EIDL can be granted based on an applicant’s credit score, and loans of under $200,000 can be approved without a personal guarantee, meaning they don’t require collateral. You may also be eligible for a $10,000 emergency cash advance that can be forgiven if it meets the usage requirements.
Can I get funding if I work for myself?
Sole proprietorships, independent contractors and self-employed persons are eligible to apply for an EIDL. There are some exceptions, including certain agricultural enterprises, if you work as a lobbyist or if more than one-third of your gross annual revenue comes from legal gambling.
If you do fit the criteria—which the CARES Act specifically notes includes independent contractors like gig workers and freelancers—you may also be eligible for the program’s $10,000 forgivable emergency advance. In order to determine how much you’re eligible to receive, you’ll need to include both your current financial information and your 2019 financials for the same period last year on the application.
You can also apply for a Paycheck Protection Program loan beginning on April 10th. The Department of the Treasury defines payroll costs for sole proprietors and independent contractors as self-employment wages, commissions, income or net earnings up to $100,000 per year. Note that if you’re an independent contractor who pays subcontractors, you may not count those payments as payroll. Instead, the government says, those subcontractors must apply for their own Paycheck Protection Program loans.
What kind of help can I get if I have more than 500 employees?
Generally, the 500-employee threshold includes all employees, including full-time and part-time workers. If your business is larger, you may still be able to get help.
For example, you may be eligible for federal relief if your business is in the hotel or food service industries, and your employees are spread out in multiple locations (and no single location has 500 or more employees). Recreation and entertainment facilities, like amusement parks and movie theaters, do not qualify.
Franchises that are listed in the SBA’s franchise directory are also eligible to apply for assistance. If your brand is not listed in the directory and you believe it should be, you can send a request to [email protected].
What are my other options?
Businesses that don’t fit into one of the categories above, or are seeking additional resources, can consider turning toward local options, like state and local relief or community funds. The CARES Act allocated $150 billion for state, local and tribal governments to provide coronavirus relief.
Some states and local governments already have funding programs in place to support small businesses. Check your governor’s website for the most up-to-date information about loans and grants for small businesses in your state. Community funds, which allow residents to donate money to help locals in need, are also popping up. For example, New York City’s COVID-19 Emergency Relief Fund was created to help community members, including health care workers and local small businesses.
Use the Council on Foundations’ community foundation locator to see if there’s a foundation raising money in your area, and confirm whether small businesses are eligible for grants. You can also check your local news for announcements that a new fund is up and running.