The coronavirus emergency is hitting the U.S. economy hard, and small businesses in Michigan and other states are feeling the brunt of it. In response, the federal government is rolling out several important assistance programs. Here’s a rundown.
Economic Injury Disaster Loan (EIDL) Program
The U.S. Small Business Administration (SBA) has a coronavirus resource page that lists various relief programs and guidance for small business owners. As part of its disaster assistance program, the SBA is providing low-interest EIDL Program working capital loans up to $2 million to small businesses and nonprofits. The loan can be used to cover accounts payable, debts, payroll, and other bills a company may have difficulty paying due to the impact of the coronavirus. Loan payment terms will vary by applicant, with payment terms up to 30 years at interest rates of 3.75 percent for small businesses and 2.75 percent for nonprofits.
As of March 23, 2020, the program is open to businesses in every state, the District of Columbia, and U.S. territories. Applications can be found here, and you can call the SBA Disaster Assistance Customer Service Center at 1-800-659-2955 for assistance with the application process.
Coronavirus Aid, Relief, and Economic Security (CARES) Act
The U.S. Senate and House of Representatives passed the CARES Act, and President Trump’s signature is expected soon. Once enacted, the Act will provide the following relief:
The Paycheck Protection Program and Loan Forgiveness
This program provides small businesses and 501(C)(3) nonprofits with $350 billion of 100 percent federally-guaranteed loans for eight weeks. Sole-proprietors, independent contractors, and other self-employed individuals are also eligible. Key provisions include:
- Loans can be forgiven when used for payroll costs, interest on mortgage obligations, rent, and utilities.
- SBA-certified lenders and non-SBA lenders are authorized to make these loans; all participating lenders, including banks, credit unions, and other financial institutions will be given delegated authority, meaning faster processing of the loans without SBA approval.
- The Treasury Secretary will have the authority to work with the SBA to expedite the approval process and bring new lenders into the program.
- The maximum loan amount for SBA Express loans, which require less documentation and paperwork, is increased from $350,000 to $1,000,000 through December 31, 2020.
- An automatic six months of deferred payments, during which the SBA will pay principal, interest, and fees on all SBA loan products.
Entrepreneurial Development Programs
These programs provide grants and funding to offer training, counseling, and assistance to small businesses affected by COVID-19, including:
- $240 million in grants to SBA resource partners, including Small Business Development Centers and Women’s Business Centers.
- $25 million in grants for resource partner associations to provide online information and training.
- $10 million in funding for the Department of Commerce Minority Business Development Agency’s Minority Business Centers.
Additionally, Entrepreneurial Development Programs allow for federal grant funds appropriated to the state Trade Expansion Program (STEP) in fiscal years 2018 and to remain available through fiscal year 2021. Also, state STEP participants may be reimbursed for events canceled due to COVID-19, so long as the reimbursement does not exceed the participant’s federal grant amount.
Emergency Economic Injury Disaster (EIDL) Grants
This program expedites access to capital for small businesses that have applied for an SBA EIDL. Businesses can request an advance of up to $10,000 on the loan to provide covered employee leaves, maintain payroll, and pay debt obligations.
Get Ready Now!
Applicants for any of these federal loan programs should be prepared to supply supporting documentation including the business’s most recent tax returns, a personal financial statement, and a schedule of liabilities listing all current debts. Be prepared to apply as soon as possible – lenders and the SBA will undoubtedly be overwhelmed.
If you have questions about business issues resulting from the COVID-19 pandemic and the federal and state assistance available to you, please contact us today. We are working remotely during the crisis and can conference with you by telephone or video.