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Relief for Small Businesses is Available

The coronavirus crisis has been devastating to our economy, and among the hardest hit are small businesses and their employees. With restaurants, shops and other consumer-driven service businesses temporarily closed and/or struggling to make payroll, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law by President Trump on March 27, 2020. The Act funds two attractive programs administered by the U.S. Small Business Administration (SBA) that provide much-needed relief for business owners in coming months.

The CARES Act establishes the $10 billion Economic Injury Disaster Loan (EIDL) program and the Paycheck Protection Program (PPP), for which $349 billion has been appropriated. All businesses or nonprofits with 500 or fewer employees, which have suffered losses due to the coronavirus, are eligible to apply. Self-employed, independent contractors also qualify for assistance.

ECONOMIC INJURY DISASTER LOAN (EIDL)

The EIDL program provides loans to cover payroll and other operating expenses that cannot be met due to the impacts of the coronavirus. The maximum loan is $2 million and the interest rate is 3.75% (2.75% for nonprofits). Businesses have the option of repaying these loans over a 30-year period. An additional benefit of the EIDL program is the availability of a $10,000 advance—an Emergency Economic Injury Grant—to assist with immediate obligations, and that never needs to be repaid.

PAYCHECK PROTECTION PROGRAM (PPP)

The more heavily funded PPP, for which applications began being accepted on April 3, 2020, is designed to assist small businesses in keeping their current employees on payroll. To qualify for funding, businesses must make a commitment to retain and continue paying their employees through a specific period. PPP loans carry an attractive 1% interest rate and must be repaid within two (2) years. The maximum loan amount is $10 million. The best part of the PPP is that if a business follows through on its commitment to retain its employees, the amount of the loan expended on payroll can be forgiven, as well as up to 25 percent of funds used to pay other operating costs such as rent, mortgage or utilities. The PPL has proven so popular in its first few days of availability that Congress is already considering an additional $250 billion in funding to satisfy demand.

Information on EIDL and PPP lending opportunities, as well as additional loan programs available to minimize damage incurred by the coronavirus crisis, can be found on the SBA website www.sba.gov/funding-programs/loans/coronavirus-relief-options

GETTING STARTED

Applications are EIDL may be completed on the SBA website www.covid19relief.sba.gov. For the PPP, the application can be downloaded from the SBA website but must be processed through an SBA-affiliated bank or credit union. While there are reports of some banks assisting non-customers, it is advisable to work with a bank with whom you already have an existing business relationship. Applicants are encouraged to apply as soon as possible, as resources are not unlimited and the banks and SBA are struggling to process an enormous number of loan applications. Despite the overwhelming demand, the SBA is committed to funding these loans as quickly as possible.