Public health and safety is everyone’s priority right now. Here at the Roscoe Village Chamber of Commerce, we are focused on the small businesses we serve. RVCC continues our focus on providing businesses with valuable resources during this unprecedented time. Our staff is currently working remotely so please contact us by phone or email for local details. Let’s keep the Roscoe Village spirit alive!
#1 – SBA Paycheck Protection Program
The SBA Paycheck Protection Program (‘PPP’) is a new protocol created under the 2020 CARES Act. The CARES Act was introduced to combat the financial implications of COVID-19 for all citizens. The PPP aims to provide relief to small business owners who cannot currently pay wages, rehire employees, and cover overhead. It is the primary relief package under the CARES Act.
Unfortunately, this program has been exhausted. On the 16th of April, it announced that it had run out of funds. However, it is expected that more funds will be provided soon. The PayCheck Protection program is facilitated by the Small Business Administration (‘SBA’), with backing from the US Treasury Department.
It provides up to 8 weeks of relief with no fees or interest. In addition, the funds can be used to pay for rent, utilities, and mortgages. Wages and salaries must stay the same, and fired employees must be rehired. More details on the now-defunct program can be found here. Many are saying that the 8 weeks of Paycheck ‘forgiveness’ will not be enough to prevent the fallout, and will have to shut their doors anyway.
#2 – SBA Economic Injury Disaster Loans
The SBA Economic Injury Disaster Loan (‘EIDL’) is perfectly suited to the current economic crisis. It can provide up to $2 Million to businesses that suffered economic injury as a result of a disaster. They must be in an area that has been officially declared to have undergone a disaster. Aside from the PPP, this is the second strongest arm of relief underneath the wider CARES Act.
However, like most of the SBA disaster programs, it has run out of funding. No new applications are being accepted and it is currently only providing $10,000 of relief to affected enterprises. This is available to every business in the USA right now. This loan does not have to be repaid and applicants will receive remuneration as the funds become available on a first-come, first-serve basis.
What is available right now is known as the Economic Injury Disaster Loan Advance (EIDL Advance). Applicants can get an advance of $10,000. The funding underneath this particular program is set to increase to $15,000 in the near future. Following a successful application, you can receive the funds within days. Unfortunately, like the PPP, this program is currently awaiting fresh funds.
#3 – SBA Express Bridge Loan
The SBA Express Bridge Loan allows businesses that currently have an Express Loan to gain access to $25,000 quickly. This loan is specifically designed to ‘bridge’ the gap while applying for other kinds of loan, such as the EIDL Advance or the PPP.
This loan is a little less appealing in the sense that it must be paid back when relief is granted in contrast to some of the other options, such as the EIDL or PPP. However, in many instances, you will not have to repay the loan. For example, you could apply for the PPP so you won’t have to cover payroll/wages for an 8 week period.
While there is a backlog right now, the Express Bridge Loan could easily tie you over until these funds become available. The turnaround for this loan is quite swift. It is a pilot program allowing SBA accredited lenders to lend up to $25,000 immediately to certain applicants.
#4 – SBA Debt Relief
Businesses that are currently taking advantage of the SBA 504, SBA Microloan, or SBA (7)(a) can have all fees, including the principal, waived for 6 months. In effect, this means that all of your debt payments can be effectively wiped out if you apply under this program.
These loans are often not small. For example, the SBA 504 commercial real estate loan can be up to $5 Million, and the monthly interest on this can be large in dollar amounts. The SBA Debt Relief program is a new offering designed specifically to assist businesses suffering from the COVID-19 fallout.
Effectively, most loans that you currently have should be forgiven payments during the current period. Both commercial and state loans are forgiving payments on existing loans, for at least 30 days. So you should have a lot of flexibility. Reach out to all lenders to see if you can get an extension of some kind, even outside of the SBA program.
#5 – Online Business Loans for COVID-19
Online lenders are almost certainly the best bet in the midst of the COVID-19 crisis. This is because online lenders like Kabbage, OnDeck, Lending Club, SmartBiz, and LoanBuilder are famous for 3 things:
Low Eligibility Requirements.
Lightning Fast Funding.
Opaque Terms and Conditions.
Right now, the most important thing for a small business owner is to get funds without delay. A typical bank loan can take months to complete with many documentation requirements. And it’s not possible to meet people in person without danger of contracting the virus.
But the online lending process can be done without meeting anybody in person. With lenders like Kabbage, you don’t even need to take a call. The money can be in the account as quickly as the next business day, after completing a 10-minute application.
The requirements will usually be $50,000 in annual revenue, a minimum credit score of 550, and 3 months of bank statements for verification. This is usually all that you need, though some online lenders will have different requirements. With the speed of application and the speed of delivery of funding, online lenders are ideally suited for the COVID-19 crisis.
#6 – SBA Microloan Program
Microloans are loans available from the SBA that are under $50,000. Microloans are available mainly to small businesses in underprivileged areas. They are also typically granted to minority businesses run by women, veterans, Hispanics, African Americans, etc. These businesses must be for-profit and must be located in the USA.
The criteria for qualifying for these microloans are quite low. A credit check is not required unless the amount is over $20,000. The borrower cannot already owe more than $50,000 at the time of application. The maximum term of the SBA microloan is 6 years, which is a very long term. No physical collateral is required, though a note of collateral must be signed.
Microloans are processed much more quickly than typical SBA (7)(a) loans. However, it is still not as quick as the emergency funds that are available. There are better options available. A microloan is not a line of credit but a term loan. Eligible uses include inventory, wages, working capital, equipment, and machinery. More details can be found here.
#7 – Business Interruption Insurance
Business Interruption Insurance is a typical insurance policy that most small business owners should have taken out. In fact, it is designed specifically to prevent these kinds of challenges. Business Interruption Insurance is supposed to cover any kind of business interruption that affects wages, fixed costs, loan payments, etc. Many insurance companies are currently trying to default on their loan obligations, claiming that COVID-19 is a natural disaster.
However, policymakers are in the process of forcing the insurance companies to make good on their obligations. In California, the commissioner has issued a notice forcing companies to cover COVID-19 claims. This kind of insurance is most typically for larger companies. Only 33% of small businesses get it, according to the American Action Forum. The issue remains quite controversial at present.
The President, and many other state senators, have made statements to the effect that insurance companies have to pay, even where there are specific exemption clauses in place. Multiple bills have been introduced by states including Massachusetts, Ohio, New Jersey, New York, California, Louisiana, Pennsylvania, and South Carolina. Consider the following clause form a New York draft bill:
Any clause or provision of a policy of insurance insuring against loss or damage to property, which includes, but is not limited to, the loss of use and occupancy and business interruption, which allows the insurer to deny coverage based on a virus, bacterium, or other microorganisms that causes disease, illness, or physical distress or that is capable of causing disease illness, or physical distress shall be null and void.
In other words, if you have Business Interruption Insurance, you could easily be reimbursed even if the contract has a specific viral clause in place.
#8 – Other Forms of COVID-19 Relief
If you have been hit hard with the effects of COVID-19, its vital to use all of the avenues at your disposal. These avenues include:
Mortgage Relief – The CARES Act allows mortgage relief up to 180 days for those affected. This is the case for Federally backed mortgages. If you cannot make your mortgage payments due to COVID-19, then you definitely need to contact your bank. All you have to do is submit a request to the servicer – no further documentation is required.
Lease Relief – know your rights. Landlords cannot evict tenants during the present time (provided they have been granted forbearance) without giving 120 days of notice. The CARES Act forbids evictions in Federally backed housing (note that you must still pay your rent – you just have a longer time to do it and won’t have any penalties for late payment). Many states and local authorities have issued laws that prevent landlords from evicting tenants.
Unemployment Benefits – If the worst comes to worst and you do lose your job, then at least you will be fully entitled to jobseekers allowance. A $2 Trillion Bill enacted in late March allows those who are now unemployed due to Cto gain the necessary funds to meet basic needs. The Pandemic Unemployment Assistance (‘PUA’) covers. Independent contractors and sick people caring for a loved one. The PAU also offers $600 on top of existing benefits for eligible applicants.
Friends and Family – There is increased solidarity among small communities and a willingness to help out. With a global pandemic, people are understanding and willing to lower costs and lend a hand. While not a direct form of finance, this is something that can be leveraged.
Capitalizing on COVID-19
The first instinct of the business owner (and people in general), when faced with a global pandemic, is to panic. But there is an abundance of ways to not only claim relief but to make a profit. Consider all of the examples given above – there is finance available to nearly everyone, even if the delays need to be taken into account.
There are many benefits to this virus, which may not be readily apparent at first. Employers will allow more people to work from home, given the necessity of working from home at present. New markets will open up. Other industries are booming – Amazon, Dominos, Burger King, and many other large chains are in the process of hiring more employees.
It has always been creativity that has propelled US businesses to the forefront of the global market. While the outlook has been quite gloomy, there is always a way to give customers what they want with innovative solutions.
Contractors and Digital Nomads
One contentious area surrounding COVID-19 relief packages is that of independent contractors and gig workers. However, if your small business does fall underneath these categories of workers, you can still avail of upcoming relief.
The Pandemic Unemployment Assistance Website will launch soon. This site will allow contractors, gig workers, and digital nomads to claim benefits. Little is known about this program as it is not currently operational. Applicants are advised to start preparing the documentation in advance.
This can provide up to 39 weeks of unemployment benefits and will be backdated to January 2020 or the first day you were unable to work. If you have tried other options and been rejected, this could be the way forward. Information needed to qualify for this benefit might include:
Copies of recent paycheck stubs.
Bank receipts showing deposits.
Billing notices provided to your customers.
Recent advertisements for your business or services.
Statements from recent customers.
Current business licenses, ledgers, contracts, invoices.
Online Lenders The Strongest Choice?
Online lenders are also processing certain government programs during COVID-19. The SBA Paycheck Protection Program can be accessed through both OnDeck, Smartbiz, and Kabbage.
If you have an existing loan with PayPal Loanbuilder, you can simply enroll in the PayPal Business Financing Merchant Assistance program. This allows a reprieve of 30 days where no withdrawals will be deducted from your existing loan. LoanBuilder also offers the SBA Paycheck Protection Program. Other online providers are operating similar forgiveness programs for existing loans – you should be able to get a month’s reprieve. However, you might still need to contact them directly to discuss your options.
If the many relief programs available to you fail, then you can always gain access to funds from online lenders, one of the easiest ways of financial growth. For example, Kabbage offers the business line of credit up to $100,000 and the term loan up to $250,000. There is no credit score (though 540 is recommended). The only real requirements are $50,000 in annual revenue and 12 months in business. The application can be filled out online and you will get a response within 10 minutes, with funds supplied as soon as the next business day.
LoanBuilder, OnDeck, Lending Club, and SmartBiz provide similar functionality. While there is a lot of doom and gloom surrounding COVID-19, if business owners make the right applications, they are unlikely to fall short of the required funding. So many options are available right now and the people who remain calm and balanced will end up in a far better position if they play their cards right.
COVID-19 Financial Resources
To exhaust all of your options, we have made a comprehensive resource page of relevant information. There are many ways to protect your finances during a meltdown.
Relevant sites that have important financial disclosures in relation to COVID include:
Summary of Financial Relief Strategies
As a small business order, make sure that you run through all of these financial tools, preferably in the order they are written below.
Other Forms of Relief (Mortgage, Lease, Unemployment Benefits, Family, Friends).
Also keep an eye out for the Pandemic Unemployment Assistance program, which is aimed specifically to help out independent contractors and small business owners who do not qualify under the existing infrastructure. The program is not operational at the time of this writing, so check in periodically through this site.
Best Option for Cash Strapped Small Businesses
The truth is that there is a myriad number of ways to avoid the financial fallout from the COVID-19. Relief is available in abundance. The main solution is just to stay calm and to submit applications to all of the relevant programs. There is a Federally mandated program to assist with every single demographic right now – including entrepreneurs and the self-employed.
At present, the PPP has run out of money, so while you may submit an application, its best to look towards other means of finance. Online lenders such as Kabbage and OnDeck can provide US small business owners with funding as soon as the next business day. You can also submit the PPP application through these lenders, hitting two birds with one stone.
Beware of Scams and Fraud Schemes
With an unprecedented amount of federal funding available through the new CARES Act and other expanded programs, scammers and fraudsters are already taking advantage of the pandemic situation. It’s important to be vigilant and careful so you don’t fall victim to these schemes. For example, the SBA will never initiate contact to offer a loan or a grant to a small business. If someone contacts you before you’ve ever applied with the SBA, suspect fraud. In addition, all of the SBA’s loan applications are completely free, so you should never pay an application fee for an SBA loan. Be sure to check the interest rate as published by the SBA, too, because many fraudsters will attempt to add interest to your loan. You can ensure that you’ll avoid these scams if you apply directly with the SBA or through a trusted, SBA-authorized lender. Learn more about guarding against fraud by visiting the SBA’s Office of the Inspector General.
Tax Credits for Paid Sick Leave
On March 18, President Trump signed a coronavirus relief package into law to take effect by April 2. The law provides tax credits for businesses with fewer than 500 employees to be used for the following paid leave mandate expenses:
Two weeks of paid sick leave for employees who have been quarantined, have a sick family member, or have been affected by school closings.
Up to three months of paid family and medical leave amounting to no less than two-thirds of regular pay for those employees listed above.
The law includes the option for the Labor Department to exempt businesses with fewer than 50 employees from abiding by the paid leave mandate, if the Labor Department deems the new law poses an existential threat to the company.
Federal Income Tax Deadline Extension and Tax Deferments
Please note the April 15, 2020 federal income tax filing deadline for the 2019 tax year has been extended to July 15th. Check with your individual state’s government to determine your state income tax filing deadline. U.S. Treasury Secretary Steven Mnuchin said individuals will be able to defer up to $1 million in tax payments to the IRS for 90 days, and corporations would be able to defer up to $10 million in tax payments.
Additional Resources Available
Small Business Majority Daily Updates Small Business Majority provides a daily updated list of resources in English and Spanish to support entrepreneurs’ ability to respond to the COVID-19 crisis in a variety of ways. Centers for Disease Control Health and Safety Guidelines for Businesses The CDC is America’s most trusted resource for health information and guidance on keeping you, your family, and your employees safe. This page is updated often with the latest health and safety information.
Click here to see our full list of resources.