Small Business Owners: Do you understand Congress has agreed to pay two months of your payroll/rent/utilities, to the extent your business has been affected by Coronavirus?

Has your business or non-profit been adversely impacted by the COVID-19 shut-down or slow-down? Will you be able to pay your employees? Or the rent? Will you be able to pay yourself? Congress is trying to help by giving away quite a bit of free money, and that should get your attention.

There are still details to be worked out about how these new plans will be implemented, but here’s some initial info:

The first and quickest option for relief is an Economic Injury Disaster Loan (EIDL) from the Small Business Administration. You can borrow funds necessary to meet expenses and obligations that could have been met had the Coronavirus not occurred.

You can apply online, and should receive an answer if you are approved in 2-3 weeks. You don’t have to accept the loan, so there’s no harm in applying.

But here’s the sweetener: You can request up to $10,000 as an Emergency Economic Injury Grant. That does not have to be repaid if used for payroll or rent. The grant is often approved even if you don’t meet the loan qualifications, and it can come to you in 3 days. Many small businesses will qualify and should apply for this.

Additionally, up to $2M can be obtained as a loan. There are other limitations with this loan plan, so not everyone qualifies. There is a limited pool of funds available, so this application needs to be done ASAP before the funds are all claimed.

Click here for more SBA info: https://www.sba.gov/funding-programs/disaster-assistance Here’s the on-line application: https://covid19relief.sba.gov/#/

Congress also created the Paycheck Protection Program (PPP), which has a larger pool of funds available to loan, $349B. Now don’t dismiss this because you don’t want to have a loan, keep reading.

Personal guarantees or collateral are not required, and there are no loan application fees. You can get a loan for 2.5 months of your historical average payroll and benefits costs. This includes the owner’s compensation if you are self-employed. (Maximum compensation rate allowed is $100K annually per employee.)

If the loans are indeed used for eligible payroll costs (up to 25% of the loan may also be used for other business expenses including rent, utilities, mortgage interest, and interest on certain equipment loans), then you can apply for the entire loan to be forgiven after 8 weeks. This effectively turns the loan into a grant.

The amount that can be forgiven in this program is reduced proportionately by any staff reductions you have from Feb 29 levels. So if your FTE count goes from 4 to 3, the amount of the loan that can be forgiven is reduced by 25%. If you re-hire employees before April 26, they won’t count against you. If your pay rates decrease, that too can reduce your forgiveness %. There is strong incentive to return to and maintain earlier staffing levels. The government would rather pay you to keep people on payroll than have them go on unemployment.

The Dept of the Treasury released application forms for the PPP today, and you may be able to apply as soon as April 3. Here’s a link to the SBA’s website: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp

Be sure to talk to your local bank or credit union right away. They’ll be the one processing these loans, and they can give you additional guidance about the loan application as it becomes available to them.

The PPP loan and forgiveness program is contingent upon, can you honestly make this declaration in the loan application? “Current economic uncertainty makes the loan necessary to support your ongoing operations.” Do you need working capital now? Are you concerned that your revenue source over the next 2-3 months is at risk, putting you in a situation where you would take out a loan? If you can affirm that need, then help is available.

On the other hand, your circumstances may not be that tight. Some businesses are holding their own so far. So Congress came up with an alternative benefit, in the form of an Employee Retention Credit. They are again trying to support employers who continue to pay their staff, rather than sending them to collect unemployment.

In some circumstances this credit may work better than the PPP loan forgiveness plan. Generally they’ll give you back 50% of the wages you pay after March 12 up until December 31, 2020, up to $5,000 max credit per employee, if the wages are paid during a quarter in which your business operations are at least partially suspended due to government orders. You’re also eligible if your revenues for a quarter are at least 50% below the comparable prior year figures, and remain so until such time as quarterly receipts exceed 80% of the prior year amounts. This program covers employee wages; self-employeds will not get the credit for their own draws. Finally, you have to choose - if you get a PPP loan, you can’t take this credit.