There is a lot of federal money available for small businesses affected by the coronavirus. Get your share.
Last week, the president enacted the $ 2.2 trillion CARES law to assist individuals, industries, states and other organizations facing the coronavirus pandemic. If you are a small business owner, there is also a large amount of money, potentially free money, for you too.
Prior to the CARES Act, small businesses could seek redress directly from the Small Business Administration (SBA) through their Expanded Economic Disaster Program. This program which is still very much in force, offers loans of up to $ 2 million directly to small businesses (those with less than 500 employees) at interest rates up to 3.75% and for a repayment period of up to ‘at 30 years old. It’s not free, but it’s definitely cheap money that can go a long way in helping you navigate your business during this downturn. The SBA even gives a $ 10,000 in advance to small businesses awaiting approval for these loans.
However, the funds provided by the Economic Accident Compensation Program are only loans. The CARES law goes even further. The law set aside $ 377 billion specifically for small businesses, and most of that is for another SBA relief program. Relief takes the form of loans, but they are only available through banks. More importantly, a good portion of these loan amounts can be forgiven. Which means potentially free money for your business.
“I’ve been an SBA lender for 36 years and have never seen benefits like this,” says Chris Earle, SBA Vice President and Director of Sales at M&T Bank, which has various locations in the Philadelphia area. “This is unprecedented action by the government in a way we have never seen. This law essentially grants working capital to small businesses to run their businesses. “
So how do you get your “free” money?
Additional loans under the CARES Act are available under the existing SBA Section 7 (a) program. To get these loans, the Treasury Department says you can go through an existing SBA lending institution or any federally insured depository institution, a federally insured credit union, and an institution in the farm credit system. My recommendation, however, is to go through an SBA lender as they have the most experience with these loans and will likely be able to process your application faster. You can find these member institutions in the Philadelphia area through the The SBA search function or by Google.
According to the latest guidelines issued by the Treasury Department, these member banks are now allowed to lend up to $ 10 million to small businesses, also at very low interest rates. You can borrow up to 2.5 times the amount of your salary expenses, which includes salaries, tips, commissions, vacation, benefits, and payroll taxes. Independent contractors and sole proprietors are also eligible for this program and will be required to provide details of their self-employment income.
Here’s the good part: amounts that are used during an eight-week period between February 15 and June 30 for the above salary costs, plus non-salary costs such as mortgage interest, rent payments, and services. public will be waived (although the government is now saying that only 25 percent of non-salary costs will be eligible for a rebate due to “high subscription”). This means free government money to help you run your business during this time with no guarantees or personal guarantees required. You can also defer payments from six months to a year. Non-profit organizations are also eligible under this program.
There are still some rules. The idea is to keep workers on your payroll, so you’ll face restrictions and penalties if you lay people off during this time. While compensation for business owners, while on the payroll, is eligible, only amounts up to $ 100,000 annualized would be eligible for reimbursement. You will need to go through your bank’s approval process. You would take the money in the form of a loan first, and then get some money back later. You will of course have to provide valid supporting documents (payroll records, invoices, receipts) to justify any remittance and your banker will have the last word. It is very important that you carefully consider these details in the final loan agreement that you have with your bank.
Also, since the bill was enacted barely a week ago, it will take a little while for all of this to be done. The SBA is receiving written policies, procedures and guidelines for its lenders this week. Banks must master the new rules. Then there is an approval process that must be followed before you start to see the money. Earle doesn’t expect clients to see funding for the next two to three weeks. However, the delay may be faster depending on the bank. “We can do all of this remotely,” he says. “And in a lot of cases, depending on the size of the loan, we can respond within a day, once we are able to deal with it. “
So, if you are a small business, what should you do now? Here’s what: Find an SBA member bank. Talk to a banker. Prepare the paperwork. Put your ducks in order. You want to do everything you can to speed up the process. Do it quickly, because who knows how long this $ 377 billion fund will last.