America’s 30 million small businesses are currently facing one of the biggest threats they have ever come up against. COVID-19 has left many of these organizations battling for survival, blindsided by an unforeseen impact. While revenue has frozen and cashflow has come to an abrupt halt, expenses are still being generated: payroll, real estate costs, equipment leasing and suppliers need to be paid.
Help is available. If you’re a small business owner and you’re not sure where to look for this help, or how to apply, you’re not alone. One study by Goldman Sachs found that 67 percent of the 1500 small businesses it surveyed are uncertain about how to access and apply for emergency funding. But this funding is there for you, and our economy is built on businesses just like yours. Here’s what you need to know:
How is Government helping small businesses?
On April 24, 2020, the President signed into law the Paycheck Protection Program and Health Care Enhancement Act. This law provides an additional $484 billion in economic relief to address financial challenges created by the COVID-19 pandemic as previously addressed by the Coronavirus Aid, Relief, and Economic Security Act or ‘CARES’ Act. The Cares Act provided $377 billion in financial support.
This new law provides, among other things, additional funds for the very popular Paycheck Protection Program (PPP) small-business loan program, funding for hospitals facing financial shortfalls and funding to increase national coronavirus testing.
The law provides $310 billion to replenish the depleted PPP which makes available loans to small businesses that are forgivable if 75 percent of the loan is used to keep employees on the payroll.
Of the PPP funds, $60 billion is targeted for lending by small lenders and community-based financial institutions that serve the needs of unbanked and underserved small business and of that $60 billion,
- $30B is set aside for insured depository institutions and credit unions with consolidated assets of $10B to less than $50B; and
- $30B is targeted for community financial institutions and small insured depository institutions and credit unions with consolidated assets of less than $10B
Additionally, this law provides $60 billion for the Small Business Administration’s disaster relief fund. This fund finances loans of up to $2 million directly to firms without a bank as the intermediary. Within the $60 billion program, at least $10 billion is set aside for the Emergency Economic Injury Disaster Loan (EIDL) program grants worth up to $10,000 each that would not need to be repaid.
Who is eligible for assistance under this new loan program?
The Paycheck Protection Program is available to all small businesses with 500 or fewer employees that have been affected by the Coronavirus pandemic – including nonprofits and faith-based organizations, veterans’ organizations, Tribal business concerns, sole proprietorships, self-employed individuals and independent contractors. The program’s goal is to help small businesses retain their workers by supporting the payment of their workers’ salaries and other business expenses. If a company has already laid off staff, it will have until June 30th to rehire them to qualify for this program.
Additionally, small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 employees.
Small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other expenses. Independent contractors and self-employed individuals can also apply.
How can I apply?
You can apply for the Paycheck Protection Program through any existing Small Business Administration (SBA) lender or through any federally insured depository institution, federally insured credit union, or Farm Credit System institution that is participating.
You will need to complete the Paycheck Protection Program’s loan application by June 30 of this year and submit it with the required documentation to an approved lender.
Can this loan be forgiven?
The loan amounts will be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and
- Employee and compensation levels are maintained.
- Payroll costs are capped at $100,000 on an annualized basis for each employee. And not more than 25% of the forgiven amount may be for non-payroll costs.
- Loan payments will be deferred for 6 months but due in 2 years with no prepayment penalties or fees for early payment.
The term of the loan is 2-years with an interest rates of 1 percent. The loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. The maximum loan amount is $10 million.
Where can I get more information?
To get more information on the Paycheck Protection Program, start with your local lender and ask if they are participating in the SBA’s program. You can also visit https://www.sba.gov/ for a list of SBA lenders.
Pitney Bowes does not currently participate in SBA’s loan programs. The SBA will also automatically pay the principal, interest, and fees on current 7(a), 504, and microloans for a period of six months and new 7(a), 504, and microloans issued prior to September 27, 2020.
The SBA also provides local assistance via 68 district offices and a nationwide network of resource partners. To find resources near you, you can go to sba.gov/local-assistance.
Your state may also have programs specifically for small business that are experiencing difficulties during this coronavirus pandemic. You should contact your state’s economic development agency for additional information. Pitney Bowes does not currently participate in SBA’s loan programs.