Economic Stimulus for small business
The COVID-19 small business stimulus package is in place. The previous post titled Response to COVID-19 provides more details about the guidelines to slow the spread of COVID-19 and the federal economic response.
Congress approved and the President signed three bills regarding COVID-19. The purpose of the COVID-19 small business stimulus package is to keep people employed.
Businesses, defined as non-essential, were asked to close.
In addition, other small businesses may have to cut back their workforce if business slows down. Business leaders have to make the difficult decision to lay off or furlough employees who are trained and valuable to the company.
As a result, the bills include loans and loan forgiveness programs for small businesses. The goals of the programs are to put money into the economy and keep the workforce in place.
COVID-19 small business stimulus package
The President signed on 3/18/2020 the Families First Coronavirus Response Act (FFCRA), the second COVID-19 economic stimulus bill.
The Response to COVID-19 post has more information about this bill.
In summary, small business employers can receive 100% reimbursement for up to two weeks of paid sick leave for COVID-19 related reasons. Reimbursement to the employer is through an offset against federal payroll taxes.
Coronavirus Aid, Relief, and Economics Act or the CARES Act for COVID-19 small business stimulus package
The third response for small businesses by the US Congress and the President is the Coronavirus Aid, Relief, and Economics Act (CARES Act). The CARES Act was signed on 3/27/2020 as Public Law 116-136.
Paycheck Protection Program (PPP) & loan forgiveness
Consequently, the Paycheck Protection Program started taking applications on Friday, April 3, 2020. The program helps to retain workers and cover payroll costs, group health benefits, employee salaries, wages, commissions, interest on a mortgage, rent, utilities, and interest on debt obligations. The PPP loan covers this cost for two months.
The PPP loan does not require collateral or a personal guarantee. The Small Business Administration (SBA) guarantees it.
In addition, the borrower is eligible for tax-free forgiveness of the loan. There is a formula that calculates the amount of forgiven debt and must prove the proceeds paid for payroll costs, interest on mortgage and debt obligation, rent, and utility payments.
The proceeds from the loan get to the business quicker by going through a local lender. These include SBA 7(a) lenders, banks, credit unions, and the Farm Credit System institution.
COVID-19 SBA Economic Injury Disaster Loan Application (EIDL)
Small businesses can apply through the SBA’s website for up to $2 million in low-interest COVID-19 disaster assistance Economic Injury Disaster Loan (EIDL).
PPP provides loans to pay employees for eight weeks, while the EIDL provides loans for non-PPP business expenses.
Help provided applying for PPP and EIDL
I recently helped a small business with both these packages. I helped gather the information and steer them in the direction of how to apply for these loans. The process is simple once the needed information is collected. The local lenders will have questions about the PPP loan, and the SBA will request additional information when needed.
Do you need help or have any questions?
In conclusion, let me know if you have any questions, would like more information about this topic or have suggestions for related topics.
Also, let me know if I can help you.
