Stimulus Resources for Small Businesses

Government options to help small businesses keep America running during COVID-19 slowdowns.

Photo by Tim Mossholder on Unsplash

As a proud alum of the U.S. Small Business Administration, I got to see up close and personal the direct impact that a small but mighty government agency can have advocating for and supporting American small business during tough economic times. The recession of 2009 and the American Recovery and Reinvestment Act were unprecedented at the time — but that all looks quaint now in the face of a global COVID-19 pandemic and the ensuing economic slowdown we’re all experiencing together.

I wanted to share what I’m learning about the CARES Act and all the stimulus activity that’s resulted on Capitol Hill as a response to the pandemic. Please keep in mind: I am not an attorney or financial counselor and a lot of this is still in flux, so be sure to consult your tax folks, lenders, and attorneys where needed, but it seems there are lots of new options a small business owner and/or sole proprietors can take advantage of to ease or offset monthly bill payments, keep people (including yourself!) employed, and keep providing critical services to the American people.

First thing: SBA’s Economic Injury Disaster Loan

SBA has long provided economic support through their Disaster Assistance teams in the wake of natural disasters and in close coordination with FEMA. These loans can only be enabled when the president declares a disaster, but now that this is done nationwide in anticipation of the incoming recession as a result of the virus, small businesses nationwide can apply for it. It’s a different angle on their traditional SBA disaster loans targeted at mitigating economic injury specifically.

From what I can tell, the first part of this is just filling out the application if you qualify and then telling them you’d “like to be considered for up to $10,000 in advance”. Generally you need to be a small business, sole proprietor, or independent contractor and have less than 500 employees — the application takes about 10 minutes to complete if you have your business vital records handy.

Apparently the first $10k comes with no strings attached and if you qualify they send you the money as a direct stimulus transfer to get you the money quickly. The second step is consideration and approval for a typical, longer term “7b” disaster loan, but of course you have the option to assess the terms and decline that if you don’t want or need to get into taking on debt.

Edit 4/15: We are seeing guidance from SBA that they are only advancing $1,000 per employee who was on payroll as of January 31 for the EIDL advances. This guidance was sent by email to lots of applicants on April ~13–14 or so. This is *NOT* the way the law appears to read and seems contrary to the intent — but for the moment this seems to be SBA’s interpretation and implementation of the program.

Email from SBA dated April 13th.

Second: the Payroll Protection Program

This is a little complicated in that it’s specifically for payroll purposes and keeping employees off the unemployment rolls. So I think you’d need to have a corporation or LLC and be a W2 employee in order to qualify. But it’s essentially a loan given through a traditional lender, but backed by SBA as a standard “7a” loan (non-disaster). It applies to payroll, mortgages, rent, and utilities and if you do it right, it looks like up to 8-weeks of that is just fully forgiven/waived.

This program is for:

• Small businesses with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons)
• Private non-profit organizations
• 501(c)(19) veterans organizations
• Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries (this applies to venture capital funded startups)
• Small businesses in the hospitality and food industry (if your NAICS code starts with 72) with more than one location could also be eligible if their individual locations employ less than 500 workers

It is also worth noting that this option appears to be mutually exclusive with the EIDL loan, so you’ll likely need to think about which option is a better fit for your needs.

Edit 4/8: Treasury released FAQs that clarify some things:

• Small business size standards are the final rule instead of a hard and fast less than 500 employees (this could apply to location or overall revenue or even non-small businesses)
• Affiliation rules apply for VC-backed startups with attention paid to majority/minority shareholders and questions of ownership or blocking board quorum
• The money can be used for sick leave and vacation and other options as part of payroll beyond just normal paychecks (very helpful if folks are sick!)
• The 8-weeks of forgiveness starts at the first disbursement of payment from the lender not from date of approval or when the act was signed..etc
• (Your mileage may vary on these — triple check every term with your lender during the approval process)

Third: SBA Loan Payment Subsidy for Six Months

This was later breaking news included in the law (Section 1112 of the CARES Act) but apparently SBA is either covering or deferring up to six months of loan payments across most of their small business loan products. This seems more complicated at the moment because apparently you need to either have a 7a, 504, or Microloan in-progress OR take out a new one within six months from March 27.

7a and 504 are larger loan products and may be overkill for many businesses if you don’t already have one, but for small or shorter-term needs, a microloans might be a sweet spot. They only go up to $50k and a six year term at maximum, so potentially you could apply for a new microloan and qualify for the six months of payment subsidy from SBA as essentially a grant — then paying off the remaining balance of the loan on its regular schedule. This one seems to be managed directly through the lenders so first stop would be your banks.

Fourth: Local State and Municipal Offerings

Washington, DC declared a disaster early and has set aside grants from the first stimulus bill (pre-CARES Act) and I expect many other states and larger municipalities will be doing similar.

Here’s the a few options for comparison:

• DC’s microgrant site
• Philadelphia’s site for up to $5k of microgrants
• San Francisco options for assistance

And here’s a massive, state/local and sector-specific list of employer resources provided by our friends at Public Private Strategies.

This is going to be a rough time for lots of America’s employees and small businesses. But for those of us who believe in government as a positive force for good in the lives of our fellow citizens, it’s nice to see SBA on the front lines of providing economic recovery options once again. I wish them all the best of luck in distributing this stimulus money quickly, efficiently, and keeping Americans at work and their bills paid.

Stay safe, healthy, and productive until we can all get back to full time work. #Solidarity