Aside from the health issues, one of the most critical aspects of the Covid19 pandemic is the economic effect of hitting the pause button on the American economy. Sheltering in place to “flatten the curve” in order to prevent our health care system from being overwhelmed has shut down huge swaths of American business as the economic activity of the country has ground to a halt.
The strategy for ensuring that this is just a pause in activity, and that the economy can crank back up once the pandemic is over, is to ensure the survival of small businesses by making available almost $400 billion.
The CARES Act consists of two programs administered by the Small Business Administration (SBA).
The first is the Economic Injury Disaster Loan Program (EIDL), which includes a $10,000 grant that businesses can apply for does not have to be paid back.
The second is the Paycheck Protection Program (PPP), which enables organizations to obtain up to $10 million in loans that are 100 percent forgivable if employees are retained (or if employees already laid off are rehired).
A wide range of individuals and businesses are eligible to apply for both programs, including:
- Any business with 500 or fewer employees
- Any 501(c)3 nonprofit that has 500 or fewer employees
- Self-employed workers, independent contractors, gig workers, and sole proprietors
Economic Injury Disaster Loan Program
$10 Billion has been allocated for the EIDL, a SBA program that has existed for some time, which makes available a $10,000 emergency “advance” that can be used to cover operating expenses, as well as other loan options.
Businesses and nonprofits can apply for the EIDL directly at https://covid19relief.sba.gov/#/
Because lending decisions are based on self-certification and credit score, the review process should go quickly. There are no loan, guarantee, or prepayment fees. But you have to have been in business by January 31, 2020 to qualify, so you can’t start a business now and receive this kind of grant.
The PPP, which includes a majority of stimulus funds at almost $350 Billion, is intended to guarantee businesses the loans they need to cover eight weeks of payroll.
If businesses keep employees on payroll or rehire them by June 30 after they’ve been laid off, these loans could be fully forgiven. Businesses are eligible for 2.5 times their average monthly payroll costs under this loan program.
Organizations can apply for PPP by calling their bank, or a lenders listed at https://www.sba.gov/article/2020/mar/02/100-most-active-sba-7a-lenders
When can I expect relief?
The EIDL application is already up and running, while the PPP went live on Friday, April 3, for small businesses and nonprofits, and will go live on Friday, April 10 for independent contractors and self-employed individuals.
The EIDL Program states that those approved for these grants should receive their money within three days of approval.
There is more uncertainty right now around the PPP because it’s an entirely new program that the SBA is trying to get off the ground and it’s not yet clear how quickly the entire effort will be fully functional, especially as banks have raised concerns about the rushed rollout.
Apply as soon as possible
The application process is streamlined and could provide a critical lifeline for small businesses.
It is important that applications be submitted as soon as possible, because both programs have a limited amount of funding.