A Guide to Federal Coronavirus Relief for Small Businesses

by Bodnar Financial on Tuesday, April 21, 2020 at 12:07 pm

Get your applications out—the PPP loan is coming back!

On March 27, the ‘Coronavirus Aid, Relief, and Economic Security (CARES) Act’ was signed into law to rescue millions of Americans struggling with mandatory business closures. The demand for these relief programs were out of this world. Most programs ran out of money after only two weeks.

We understand how frustrating this can be—and we are here to help. Below is a breakdown of everything we can find on federal relief programs for small businesses impacted by the COVID-19 pandemic, and how to access these benefits.

PS: If you are starting from scratch, New Jersey has an “Eligibility Wizard” to help you figure out what programs you might qualify for, and a grant size calculator to estimate how much money you can expect.

Federal Relief Programs for Small Businesses

Many of these programs are out of funds and not currently taking applications. But you should fill out the paperwork anyway, when possible. UPDATE: President Trump signed a relief bill into law on Apr. 24 that will add $310 billion to the Paycheck Protection Program and more funds for the Economic Injury Disaster Loan (EIDL) program. Have your applications ready!

The funds are awarded on a “first-come, first-serve” basis. If the first round of loans was any indication, the funds will be scooped up quickly and you will want to move fast. Last round, the fund was out of money within weeks. Experts predict it might only last a few days this time around. Having your paperwork ready to go will ensure that you get into the queue as quickly as possible.

The Paycheck Protection Program (PPP)

Will be accepting applications soon. You can fill out paperwork here.

A lending program for small businesses with 500 or fewer employees, including 501(c)(3) nonprofits, sole proprietors, independent contractors, and self-employed individuals. The loan has an interest rate of 1% and will mature in two years. Lenders must allow borrowers to defer payments for at least 6 months.
The loans are given by SBA-approved lenders, not through the SBA directly. People were having better luck securing the loans from banks they already had relationships with, so we suggest contacting the local bank with your business checking account to see if they are an SBA lender.
There are no fees for applying for the loan, and no personal guarantees required. The interest rate on the loan cannot exceed 4%. If certain conditions are met, loans can be partially or fully forgiven. Loans that are forgiven are considered grants, and are not taxable.
In order to be afforded loan forgiveness, the loan must be used to pay for eligible expenses (e.g., payroll, rent, utilities, group health care benefits, mortgage interest, pre-existing debt obligations) that are incurred within eight weeks after the loan is granted.
At least 75% of the forgiven amount must have been used for payroll. Payroll costs are capped at $100,000 a year for each employee. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
The loan can be for as much as two months of your average monthly payroll costs from the past year, plus an additional 25%. The loan amount is capped at $10 million.

Main Street Lending Program

The application has not yet been released, and some details are subject to change. We will update this post when more information becomes available. The program is set to launch in the next couple of weeks.

The Federal Reserve is offering four-year loans for small and mid-sized companies with up to 10,000 workers, or with revenues of less than $2.5 billion.
Loans range between $1 million and $150 million with an interest rate of about 2.5% to 4%. There has been some push to lower the minimum loan amount, so stay tuned.
Principal and interest payments will be deferred for one year. Unlike the PPP loans, Main Street loans are not forgivable, not even partially.
To be eligible, companies must have at least $250,000 in earnings before interest, taxes, depreciation and amortization (EBITDA), and no debt. Companies with debt have higher EBITDA requirements.
Borrowers must follow the compensation, stock repurchase and dividend restrictions that apply to direct loan programs under the CARES Act. They cannot use the loan money to repay other loan balances.
Beware: You may be required to pay off your Main Street loan before repaying other loan commitments of “an equal or lesser priority.” There is an exception for mandatory principal payments, but it is not clear how the Fed will define what other debts are “equal or lesser,” and which ones are not.

Debt Relief for Existing SBA Loans

If you currently have an SBA loan, pay extra attention!

The Small Business Administration (SBA) will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months.
The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.
For current SBA Serviced Disaster (Home and Business) Loans: If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020. Interest will continue to accrue on the loan.
If you have auto-payments set up for these loans, you are responsible for canceling them. You are also responsible for re-scheduling them after the relief period is over.

The Economic Injury Disaster Loan (EIDL)

Will be accepting applications soon. You can check for updates here.

Provides small businesses with 500 or fewer employees (including sole proprietorships and independent contractors) with loans of up to $2 million.
Loans are provided directly from the SBA, not banks.
The interest rate is 3.75% for small businesses and 2.75% for nonprofits. The loan matures in 30 years. Small businesses may be eligible for deferral of principal and interest for up to 4 years.
The loan may be used to pay fixed debts, payroll, accounts payable, and other bills that cannot be paid because of the disaster’s impact.

The EIDL Loan Advance

Will be accepting applications soon. You can check for updates here.

A forgivable loan advance of up to $10,000 for small businesses with less than 500 employees, including nonprofits, sole proprietorships, independent contractors and self-employed individuals.
The amount of the advance is determined by the number of pre-disaster employees, with $1,000 granted for each employee.
The loan may be used to pay fixed debts, payroll (including paid sick leave), accounts payable, meeting increased costs to obtain materials due to interrupted supply chains, and other bills that cannot be paid because of the disaster’s impact.

SBA Express Bridge Loans

Will be accepting applications soon. You can check for updates here.

If you currently have a business relationship with an SBA Express Lender, you can access up to $25,000 quickly to bridge the gap while applying for a direct SBA Economic Injury Disaster loan.
The bridge loan would be repaid in full or in part by proceeds from the EIDL loan. If you do not get the EIDL loan, you may still be on the hook for some fees and an interest rate of “Maximum of Prime + 6.5%.”
The business must have 500 or fewer employees, although there are some exceptions for certain industries.

CARES Act Tax Relief

The law includes two provisions to reduce the burden on businesses impacted by COVID-19:

Employee Retention Tax Credit: A refundable 50 percent tax credit on the employer-paid portion of payroll taxes on wages up to $10,000 per employee. Excluded from this tax credit are payroll taxes that are covered under the new paid leave and/or paycheck protection program rules.
Delay in Payment of Payroll Tax: Defers employers’ obligation to make Social Security tax payments through the end of 2020. This provision applies to self-employed persons, too. The provision requires the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. Employers who receive a PPP loan are excluded.

There are additional federal relief programs geared toward specific industries, like farming and manufacturing. Contact the office if these might apply to you.

Private Grants and Loans

The federal government says more help is on the way.

But if you cannot wait that long, check out these opportunities below for private grants and loans. I have not vetted each of them, but since time is of the essence, I am posting them as a resource that you can investigate independently of me.

If any of them jump out at you, make an appointment for a phone call or Zoom meeting and we can talk through it.

PRIVATE RELIEF PROGRAMS

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