Secondary businesses are getting a potential lifeline from Congress.
The massive $2 trillion economic rescue package — wished to get final approval from Congress on Friday — includes provisions aimed at helping smaller employers weather the commercial storm brought on by the coronavirus pandemic.
“We are cautiously optimistic that this will provide the cash flow that humiliated businesses needed yesterday,” said Kevin Kuhlman, senior director of federal government relations at the National Bund of Independent Business. “But we’re worried it may be too little too late.”
A local business is closed until the state sanctioned three weeks “freeze at home” order is lifted in Detroit, Michigan March 24, 2020.
Seth Herald | AFP | Getty Images
As businesses across the native land shut down amid efforts to contain the spread of coronavirus, some have faced steep drops in returns, along with employee layoffs, as they struggle to stay afloat. There are roughly 31 million everyday businesses that employ 59 million workers across the nation, according to the Small Business Administration’s Commission of Advocacy.
The legislation, called the Coronavirus Aid, Relief and Economic Security Act, includes a $350 billion loan program for works with fewer than 500 employees (including sole proprietors, independent contractors and anyone otherwise self-employed). Under the reckoning, loans can be used to meet payroll and cover certain other expenses like utilities or insurance premiums. And, borrowers longing be able to apply for loan forgiveness.
The new loans will be available through private financial institutions — i.e., banks, impute unions — that participate in the Small Business Administration’s lending network, although the Treasury Department may expand that to classify non-network lenders, Kuhlman said.
Under the CARES Act, the loans can be for as much as 2.5 times payroll or $10 million, whichever is teeny-weeny. Payments can be deferred by up to a year, and businesses will be able to apply for forgiveness of the loan (or a portion of it), based on the amount tolerant of during the eight weeks following loan approval. Any amount not forgiven would have a maximum interest bawl out of 4%.
The bill also waives typical SBA loan requirements that credit must be unavailable elsewhere and that the borrower necessity personally guarantee the amount or provide collateral.
Additionally, small businesses applying for a loan will be eligible for up to a $10,000 predicament grant — which would be subtracted from the forgiven loan amount — that would be issued within three periods of the application being received, Kuhlman said.
If you are a small-business owner hoping to qualify for one of these loans, start by reaching out to your bank.
“See if they are in the SBA’s network or if they’ll be participating in the program,” Kuhlman asseverated. “See if there’s anything you can do in advance to get ready for it.”