A breakdown of four major types of financial relief or aid programs for small and mid-size businesses dealing with the coronavirus outbreak.
Unquestionably, small businesses are getting hit hardest by the financial impact of the COVID-19 pandemic.
The lockdowns and shelter-in-place orders have put many small businesses into stasis, and many are struggling to remain a “going concern.”
The good news is that the Federal government, states, cities and community organizations are rushing to provide funding to businesses struggling through the coronavirus outbreak. Those funds, whether through loans or grants, are a lifeline for SMBs that want to keep serving customers, paying employees, or just keeping the business afloat.
But as these programs are rushed out, many businesses have struggled to find clear information about the availability, eligibility or even how to apply for funding.
There are multiple types of programs available. If you’re a small business trying to stop the bleeding from the coronavirus pandemic, it’s worth looking into a variety — if not all — of them. This article provides a clear view of the types of financial assistance programs currently available to small businesses negatively affected by COVID-19.
The CARES Act Paycheck Protection Program
The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was a part of a massive $2.2 million stimulus package signed into law on March 27, 2020.
Within the program was $350 billion earmarked for low-interest loans to small businesses facing sharp drops in revenue. The Paycheck Protection Program is intended to help small businesses cover the cost of keeping their workers on the payroll.
This is probably the largest single financial resource available to small and mid-size businesses during the pandemic. Under the terms of the program, businesses with fewer than 500 employees can apply for up to $10 million in loans based on their employee size to fund payroll, utilities, rent or mortgage payments.
The best part of the program is that the loans can be forgiven so long as employers keep their workers on the payroll and (mostly) keep their salaries intact.
The loans are available through approved banks and lenders, and loans can start processing on April 3, 2020. But the Small Business Administration (SBA) has provided a sample application form in advance.
SBA Coronavirus Small Business Relief Loans
Prior to the stimulus package, the SBA was directed to lend out as much as $50 billion in disaster relief loans to small businesses that had been adversely impacted by the COVID-19 pandemic. These coronavirus relief loans could go up to $2 million with interest rates at 3.75% for small businesses and 2.75% for nonprofits. Repayment can be up to 30 years.
Even with the Paycheck Protection Program in place, these SBA disaster loans are still available. And they’re available in every state, where previously it took a state by state process to declare eligibility.
Unlike the loans through the Paycheck Protection Program, these loans are not eligible for forgiveness. But they also don’t have stipulated terms around using 75% of the funds for payroll to qualify for forgiveness. You can also apply for them online.
If you want to learn more about the SBA coronavirus relief loans, there’s more information in this article.
State and Local Grant and Loan Programs
Federal funding is by far the most extensive amount of money available to small businesses during this crisis no matter what state you are in.
However, that doesn’t mean it’s the only financial relief available. Small businesses should look at the local level to determine what might be available. State, county and city governments have created programs to help small businesses — often the very smallest — try to avoid bankruptcy. Local community groups and foundations have also stepped in.
These are a few of the types of programs that might be available at the local level:
- Grants and microgrants for nonprofits and very small businesses
- Bridge loans to provide assistance in between receiving loans disbursements from the SBA
- Low-interest loans through the state government or local financial institutions
- No-interest loans for bars and restaurants
A searchable database by state, county and city of these types of programs are available here.
If you want to get a side-by-side comparison of the Payroll Protection Program vs the SBA disaster relief loans, you can read this article.
Bank Relief Programs
If a small business faces hard times due the coronavirus pandemic, one of the first calls should be to their bank.
Many banks are offering relief programs through low- or zero-interest loans, working capital through community development financial institutions (CDFIs), waivers for late fees, and other related programs.
The American Bankers Association is keeping track of these programs here. Business owners can look up their bank by alphabetical order.
Vendor COVID-19 Programs
Though these don’t typically qualify as financial aid, many vendors are taking steps to help small businesses adapt and weather the crisis.
Payment processor Square is waiving its monthly software subscription for the month of March and waiving curbside and delivery fees for the next three months. PandaDoc is offering free e-signature software for small and medium sized businesses adjusting to remote work. Zenefits (which produces Workest) is providing free payroll software to new customers with a subscription to any of their HR software packages.
Small businesses should monitor communications from vendors to see if they’re offering special promotions or relief programs.
Editor’s Note: Neither Workest or Zenefits is affiliated with, nor endorsing, the financial assistance programs listed in this article. This article is for informational purposes only. We cannot advise on how to apply for any of the programs listed. Readers should consult the programs directly with questions or concerns.