Small Business
Small businesses have been hit especially hard by COVID-19, or coronavirus. They often have limited access to capital and lower cash reserves than larger businesses. These factors, combined with supply chain disruptions and lower sales, are making it tough for small businesses to make payroll and keep up with mortgage or rent obligations.
Congress is working hard to make sure America’s 30 million small businesses can weather this storm. Phase III of coronavirus legislation, the CARES Act, includes the following small business provisions administered by the Small Business Administration (SBA):
Paycheck Protection Program
The Paycheck Protection Program provides 100 percent federally-guaranteed loans for 8 weeks of assistance to small businesses and 501(c)(3) nonprofits. This loan product is contained within the SBA’s 7(a) loan program.
Both existing SBA lenders and new lenders brought into the program with the assistance of the Department of the Treasury will be able to offer these loans to eligible small businesses.
Who is eligible?
Small businesses and 501(c)(3)s with 500 employees or fewer would be eligible for this program. Additionally, sole-proprietors, independent contractors, “gig economy” workers, and other self-employed individuals are eligible.
Details:
- If a small business owner uses the loan to maintain payroll, the portion of the loan used for payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven.
- There is flexibility in the program for businesses that re-hire workers that were previously laid off. To receive loan forgiveness, a business will have to work with a lender to justify their payroll was maintained through documentation.
- The maximum loan amount will be the lesser of $10 million or 2.5 times the average monthly payroll based on the prior year’s payroll. Built into the new Paycheck Program loans will be automatic deferrals of principal, interest, and fees for six months.
- $350 billion will be provided for the Paycheck Protection Program.
- The covered loan period as beginning on February 15, 2020 and ending on June 30, 2020.
Small business owners interested in a loan under the Paycheck Protection Program should reach out to their bank or lender.
Emergency Economic Injury Disaster Loan (EIDL) Grants
These grants expedite access to capital for small businesses who have applied for a Small Business Administration EIDL. Businesses could request an advance of up to $10,000 on the loan to provide covered leave, maintain payroll, and pay debt obligations.
Entrepreneurial Development Programs
The CARES Act also provides grants and funding to offer training, counseling, and assistance to small businesses affected by COVID-19.
- $240 million in grants to SBA resource partners, including Small Business Development Centers and Women’s Business Centers.
- $25 million in grants for resource partner associations to provide online information and training.
- $10 million in funding for the Department of Commerce Minority Business Centers and minority chambers of commerce for education, training, and advising.
