Your easy guide to small business relief programs with the CARES Act, emergency loans, and paycheck protection.
With small business relief details evolving daily, it can be hard to keep track of resources and information. From eligibility requirements to loan maximums, here’s a breakdown of the latest. Plus, the top four things you should do right now.
Coronavirus Aid, Relief, And Economic Security (CARES) Act
What Is It: A $2 trillion stimulus bill designed to reduce the economic downturn brought on by the pandemic.
Who It Helps: Businesses, industries, individuals, families, gig workers, contractors, and hospitals. The bill sets aside $367 billion for small businesses in the form of loan and grant programs.
How It Supports SMBs: Two targeted packages—Economic Injury Disaster Loans and the Paycheck Protection Program—cater directly to the needs of small businesses.
Economic Injury Disaster Loans (EIDL)
What You Get: Based on how much economic injury your business has suffered, you could borrow up to $2 million at an interest rate is 3.75% and a term as long as 30 years. Additionally, the program includes a forgivable advance (basically a grant) of up to $10 thousand, depending on your number of employees. Good news: you can still qualify for the grant even if your business loan gets denied, so it’s definitely worth applying.
Conditions: Loans must be used for working capital needs, like fixed debt and payroll. Interest rates range from 3.75% for businesses to 2.75% for nonprofits, with a term of up to 30 years depending on your needs. Your first payment also won’t be due for a full year.
- For EIDL: Independently owned businesses organized for profit that employ a maximum of 500 people (some industries are allowed more, so check here). You must have a place of business in the U.S and operate primarily within the states, significantly contributing to the economy via taxes, or use of American products, materials or labor.
- For Forgivable Advance: Businesses that have applied for an EIDL (you request the advance when you fill out the loan application). Employers must maintain or quickly rehire employees at salary levels. You get $1,000 per employee with a limit of $10,000.
Ready To Apply? Get started on the U.S. Small Business Administration website application portal. https://covid19relief.sba.gov/#/
Paycheck Protection Program
The Goal: Incentivize small businesses to keep their workforce employed during the coronavirus crisis with a Small Business Administration loan.
What You Get: SBA will forgive loans if all employees are kept on the payroll for eight weeks, and the money is used for payroll, rent, mortgage interest, or utilities.
Conditions: For full forgiveness, Paycheck Protection loans must go towards interest on mortgages, rent, utilities, and payroll. It’s important to note that the bulk of the forgiven amount (75% to be exact) must cover payroll costs. If full-time headcount declines or if salaries and wages decrease, forgiveness will be reduced. Expect loans to get deferred for six months, have a maturity of 2 years, and an interest rate of 1%.
Who Is Eligible: Any small business or nonprofit (including sole proprietors and independent contractors) that has 500 or fewer employees may apply for one loan. A taxpayer identification number (TIN) is also required.
How To Apply: Head to a bank approved by the U.S. Small Business Administration—you can look up lenders here—and inquire about the program. The bank will decide if you qualify. Hurry, it’s first come first served. To view an application, click here.
Crowdz COVID-19 Relief Tips:
- Have employees you plan to submit for? Make sure you have payroll records for each one as February 12, 2020.
- Fastrack your funds by filing with your bank of record and including your banking information (e.g., routing and account codes) on your application.
- There are lots of programs out there that relate to everything, from payroll to daily operations and injury. Make sure you qualify for a program before you apply.
- Think all loans are forgivable? Think again. While some are forgivable, others are not. Do yourself a favor by calling your accountant and advising them of your intentions.