Solutions For Small Businesses Affected By The Covid-19 Pandemic
In the midst of this pandemic, there are many factors that created uncertainties and economic losses to businesses. The Small Business Administration (SBA) has created relief programs to assist businesses due to the negative externalities and impacts caused by Coronavirus (COVID-19). The US government has located funds available to loan to businesses to sustain their operating activities. The loans and advances are processed by local lenders, FDIC-insured financial institutions that are participating in the relief program. If you are wondering whether you qualify for the loan as a sole proprietor or independent contractor, the SBA has considered them as small businesses as well.
Paycheck Protection Program (PPP)
One program is commonly known as the Paycheck Protection Program (PPP). The program is designed to assist small businesses that find themselves in financial hardship due to the Coronavirus pandemic. The maturity length of the loan is two years with an interest rate as low as 1%. No fees are charged and collateral is not required. In case business owners are worried about not being able to repay the loan due to the economic uncertainties, the loan is forgivable if certain conditions are met based on the salary. The conditions include using at least 75% of the funds to cover payroll, and the remaining should be used to cover utilities, rent, and mortgage interest. If you are not sure whether your business qualifies, this link will guide you depending on your industry and income threshold. The application process started on April 3rd, and the programs will continue until June 30th. Lenders will start collecting their payment 6 months after the disbursement date.
Economic Injury Disaster Loan (EIDL) Emergency Advance
Another program is the Economic Injury Disaster Loan (EIDL) Emergency Advance, designed to advance funds to small businesses that are facing difficulties due to the current pandemic.Small businesses must have less than 500 employees, at the exception of few industries, based on the SBA size standard tool available. The funds can be disbursed within a few days after the application has been accepted. It is up to $10,000, and the advance does not have to be repaid.
SBA Express Bridge Loans
Another loan is the Express Bridge Loan, designed for businesses in economic hardship that need immediate access to cash up to $25,000. The loan is not forgivable and is meant to be fully repaid, unless it has been processed through EIDL.
Small Business Debt Relief
If small businesses already had ongoing loans before the pandemic outbreak, the SBA created the Debt Relief program to delay the interest and principal payments due to the financial hardship caused by COVID-19. However, the interest will still continue to accrue even if the borrowers are not making payments. This program is designed to defer liabilities until December 31, 2020. For additional information, this link is available to assist business owners. The actual economic situation shows how business budgeting is critical, especially in these moments of uncertainty.