UPDATE: While the initial Paycheck Protection Program allocation of $349 billion ran out within the first two weeks, the Senate passed a measure on April 21, 2020, to add an additional $300 billion in funds to the PPP. The House is expected to also pass this measure on April 23, 2020, with funds available as soon as this Friday, April 24, 2020.
If you have not already submitted your application to your bank or financial institution, time is of the essence, with many predicting that the new allocation of funds will be apportioned quicker than the first.
If you have already applied but did not receive funding, now is the time to contact your financial institution to ensure that you are still in the cue to be processed when the Small Business Administration opens the doors again to allocate this round of funding for the Paycheck Protection Program. LifePro will monitor the situation and continue to provide updates.
Small businesses in America are facing extraordinary circumstances to keep their doors open while being forced to close them to help slow the spread of COVID-19. Congress passed, and the President signed into law, a $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act in response to the economic impact of the ongoing pandemic.
We’ve put together 5 takeaways from the CARES Act you can use to better support your small business clients throughout this trying time.
1. Paycheck Protection Program
The Paycheck Protection Program will provide $350 billion to encourage businesses to keep workers employed and to provide the ability for them to be able to rehire employees that have been laid off or furloughed.
This program is available to companies that employ 500 or fewer employees per physical location and the loans will be fully forgiven if the funds received are used for payroll costs, interest on mortgages, rent, and utilities for office space.
It provides up to 8 weeks of average payroll, and other costs will be forgiven if the business retains its employees and their salaries. The program provides zero-fee loans of up to $10 million.
Click here to download several resources we’ve collected about the Paycheck Protection Program.
2. Emergency Economic Injury Grants
$10 billion of the stimulus bill is dedicated to an advance of $10,000 to small businesses and nonprofits that apply for an SBA economic injury disaster loan (EIDL) within three days of applying for the loan.
EIDLs are loans of up to $2 million that carry interest rates up to 3.75% for companies and up to 2.75% for nonprofits, as well as principal and interest deferment for up to 4 years. The loans may be used to pay for expenses, including payroll and other operating expenses, that could have been met had the disaster not occurred.
The loan does not need to be repaid, even if denied an EIDL, and may be used to provide paid sick leave to employees, maintaining payroll, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
The grant is available to small businesses, private nonprofits, sole proprietors and independent contractors, tribal businesses, as well as cooperatives and employee-owned businesses in operation on or before January 31, 2020.
Businesses that receive an EIDL between January 31, 2020 and June 30, 2020 as a result of a COVID-19 disaster declaration are eligible to apply for a PPP loan or refinance their EIDL into a PPP loan. In either case, the emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven in the payroll protection plan.
3. Debt Relief
The stimulus includes $17 billion in funding for immediate relief to small businesses with standard SBA 7(a), 504, or microloans. Under this provision, SBA will cover all loan payments for existing SBA borrowers, including principal, interest, and fees, for six months. New borrowers who take out an SBA loan within six months are also eligible.
It further encourages banks to provide more relief to small business borrowers by allowing them to extend the duration of current loans beyond existing limits; and enables small business lenders to assist more new and existing borrowers by providing a temporary extension on certain reporting requirements.
The six months of SBA payment relief may not be applied to payments on PPP loans, but businesses may still apply for a PPP loan to provide the capital necessary to keep their employees on the job.
4. Paid Leave for Government Contractors
Government contracts are also protected with the CARES Act. The stimulus includes a provision that provides paid leave for employees working on small business contracts with the federal government.
Agencies are able to modify the terms of their contracts to reimburse small business contractors for the cost of providing paid leave, including sick leave, to employees or subcontractors that are unable continuing working on-site due to closures and cannot work remotely.
5. Business Counseling Services
The stimulus provides access to reliable counseling and mentorship services to the network of Small Business Development Centers (SBDCs) and Women’s Business Centers (WBCs), as well as the Minority Business Development Agency’s Business Centers (MBDCs).
The $275 million in funding will allow SBDCs, WBCs, and MBDCs to hire staff and provide information and resources related to COVID-19 in order to provide consistent, timely information to small businesses.
LifePro is here for you
Small businesses are struggling to respond to the economic implications of COVID-19, but as financial professionals, it is vital to provide clarity and direction to your clients that are overwhelmed and especially vulnerable during this time of uncertainty.
For more details on how LifePro can be a resource for YOU, contact your Field Support Representative, FSR at (888) 543-3776.