Small businesses like restaurants, caterers and shops across the U.S. are reeling from losses sustained during the coronavirus pandemic, with millions of workers laid off.
Congress just passed a $2 trillion coronavirus relief package to help. President Donald Trump signed it into law on March 27.
Many of the provisions in the aid package are designed to help employers keeping paying their workers — to keep employees on the job, whether they’re working or not, said Jennifer Berman, CEO of MZQ Consulting.
The $349 billion Paycheck Protection Program, which opens Friday, offers loans of up to $10 million to employers with fewer than 500 workers. Larger hotel and restaurant chains may still be eligible, as long as each location has fewer than 500 employees.
The U.S. has more than 30 million small businesses, according to the U.S. Small Business Administration. The loan program is open to nonprofits, veterans organizations, sole proprietorships, the self-employed and independent contractors.
An employer must certify that the current economic uncertainty makes the loan necessary to support the ongoing operations of the business, Berman said.
The program provides funding for up to eight weeks of payroll, mortgage and rent payments as well as utilities to businesses that keep workers on during the crisis. It also can apply to companies that re-hire recently laid off workers, Berman said.
“It’s a good short-term liquidity solution, but it may not be sufficient for the duration of the shutdown we’re facing,” said Carolyn Z. Alford, a partner and head of the financial services industry at King and Spalding law firm in Atlanta. Still, “this is a really attractive program, the best that we’ve seen that’s targeted to small business. It’s straightforward on its terms and should be able to be executed quickly.”
Paperwork for the loans is available on the website for the Small Business Administration. Businesses can go to a participating SBA lender, bank or credit union, apply for a loan, and be approved as soon as the same day.
“If you have a relationship with a bank or an SBIC lender, that would helpful,” Alford said. “If you can go to people who’ve already vetted you, it’s quicker.”
The loans will become available starting Friday and be offered through June 30 of this year. Corporations and sole proprietors can apply beginning Friday. Independent contractors can apply starting April 10.
Businesses will need to show evidence of recent payroll expenses and have to agree to continue to employ those people, Alford said.
All loan payments will be deferred for six months. But the SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used to pay wages, rent, mortgage interest or utilities. That’s a unique aspect of a program of its size, Alford said.
At least 75% of the forgiven amount must have been used for payroll.
Minority and women owned businesses may be eligible for special consideration, Berman said.
“It’s going to help the employers take care of their employees,” Berman said. But, she warned, “the funding could go quickly, so people should be prepared.”
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