Dear Small Business Owners, Pay Your Staff to Stay Home.
I guess somehow in all of this, I have made it my mission to be as informed as possible about the impact of this disease and what our country is doing to help those affected by it. Not those hospitalized or in critical condition (as a writer, there isn’t anything I can do there), but the millions upon millions of vulnerable citizens in our country who are ever just one small emergency away from hunger or homelessness — many of whom had jobs a month ago, but are now suddenly facing eviction. And not less so, the tens of millions of small businesses who face losing everything they’ve built, coming out the other side of this in bankruptcies that will ripple through our economy for decades. The only tool I have in this fight is information.
The government recently passed the CARES Act, which provides hundreds of billions of dollars in safety nets for Americans, including $377 billion in loans and grants for small businesses. There are over 30 million small businesses in America, they comprise 99% of all registered businesses, and employ 47.5% of the American workforce. It is imperative to our economy to save them and the people they employ. If you own a small business with fewer than 500 employees, even as a sole-proprietor or independent contractor, YOU CAN GET MONEY.
Many non-essential businesses are mostly closed. Many restaurants and small retailers are working with skeleton crews barely hanging on. Some have let go of staff, but promised jobs will be there when this is over, though no one knowns when exactly “when” is. Many cities are entering lockdown, forcing indefinite mandatory closures. More are sure to follow. We have at least another month of this, if not more.
What you need to do right now is apply for an SBA 7(a) loan as part of the Paycheck Protection Program, hire back everyone who was working for you before this hit (at a reduced salary), and then tell them to stay home.
The red tape surrounding these loans has been greatly reduced, and business owners no longer need to provide collateral or personal guarantees. They have also been extended to include nonprofits, sole-proprietors, tribal entities, and independent contractors. Loans go up to $10,000,000 and are calculated on 2.5x your average monthly payroll. Note that adjustments are made to include cash tips for employees.
You may be thinking, well, I can’t be another $100,000 in debt when I get out of this. You won’t be. The terms of the small business loans are that ANY part which is used for payroll (for employees who make less than $100,000), rent, mortgage (interest only), or utilities is forgiven for up to 8 weeks. You can keep your lights on, keep your employees fed with a roof over their heads, and, at the end, pay little or nothing back to the government. One of the caveats however, is that this amount is reduced by the amount you reduced your workforce or reduced salaries (anything over 25%) compared to the same period last year. If you weren’t open yet last year, it is compared to the first three months of this year. HERE is a very helpful guide as to how much you can get and what qualifies for forgiveness.
You can also reduce salaries during the period February 15, 2020 through June 30, 2020, so long as they are restored by June 30. Please note: the SBA is now saying at least 75% must be used for payroll to be forgiveable, but this is mentioned nowhere in the wording of the bill. I’ll update as that develops. Interest and payments will be deferred for 6 months, and loans have a 2-year maturity at a rate of 1%.
So tell your employees to go home. Tell them you will pay them 75% of whatever they were making. When this is all over, you will have an already-trained workforce ready to jumpstart your reopening, rather than having to hire and train new people after many of your old employees were forced to find new jobs. The spirit of this legislation is to keep people in their jobs, keep businesses in their storefronts, and keep paychecks flowing to the 47.5% of American workers who work for small businesses. Let’s do what they’re asking.
I’m sure many small businesses are already aware of these programs as they have already been flooded with applications. I’m sure many more would love to keep paying their staff, but don’t have enough cash, and it will be weeks until these loans are funded. I get it. Do whatever you need to do now. Tell your employees what you’re trying to do to keep them in their jobs. Tell your landlord you will be able to pay rent as soon as the money comes in. Pay your employees on a credit card via PayPal and pay it off as soon as your loan is funded if you can. Whatever you have to do.
If you need money NOW, apply for an Economic Injury Disaster Loan. You can get a $10,000 advance in as little as three days based solely on your credit report. These loans can be used to pay sick leave, maintain payroll, meet increased costs due to interrupted supply chains, make rent or mortgage payments, and repay obligations that could not be met due to revenue losses. That last part is important. It means you can use the loans to pay off credit cards you used to keep your business afloat. Previous disaster loans required you to have been in business for a whole year. That has been amended to January 31st, 2020, and the program expanded to include self-employed people and independent contractors, even those without any employees.
$10 billion has been allocated for these disaster grants, but the total loan amounts are much smaller than loans under the SBA Paycheck Protection Program. Even if you are denied the loan, you will not have to repay the advance. However, if you are approved under this, and then apply for a Paycheck Protection loan, the $10,000 grant will reduce the amount you can have forgiven. Essentially, it’s forbidding you from doubling down on free money.
The sooner you apply for help, the sooner you can get it. If we can just get through the next three to four weeks, I believe we can save the vast majority of businesses that are the lifeblood of this country. Not the lifeblood of the economy, but our lifeblood — the lifeblood of the people. Our economy is not the stock market as much as Donald Trump would have you believe. It is the tens of millions of Americans who put everything they had into their restaurant or bakery or hardware store; it is the people they employ and the beer you stop to have at your local pub after work. That’s what keeps our country running. Let’s make sure that when people are ready to get back behind the wheel, that the car can still start.
Surely large corporations will be taking advantage of their hundreds of billions of dollars, now make sure to get yours.
If you want more information, you can head to the SBA website, which can match you with a local lender in your area. Applications for small businesses open today, so APPLY TODAY. And share this with any small business owners you know who may not know what options they have. Our government, for once, is trying to help.
U.S. Chamber of Commerce Facts Sheet
SBA Small Business Guide to Loan Resources