Does your small business or nonprofit qualify for the new Coronavirus-related forgivable SBA loans? The answer may be yes. And it doesn’t matter how small your organization is. Even sole proprietorships, independent contractors, and self-employed individuals are covered in many cases.
Here at Blue Star Business Services, we’re getting the word out to our clients about the various programs available to help small businesses and nonprofits affected by the COVID-19 pandemic.
There are two main federal SBA loans enacted by Congress: the Economic Injury Disaster Loans (EIDL) and the Paycheck Protection Program (PPP). There are some key differences between the two programs. But most small businesses and nonprofits may be eligible to apply for both.
We also have information below on a variety of other funding sources available through state government, nonprofits, and corporations. We’ve also included info on how to strengthen your digital marketing at a time when millions of people are conducting many more aspects of life online!
The Economic Injury Disaster Loan
The EIDL was the first of the two programs put in place by Congress to help small businesses and nonprofits weather the COVID-19 pandemic. In March, the U.S. Small Business Administration (SBA) opened the program to businesses with 500 or fewer employees, private nonprofits with 500 or fewer employees, sole proprietorships, independent contractors, and several other types of businesses.
Importantly, the EIDL includes a grant of up to $10,000 that businesses can apply for, which does not need to be paid back. Make sure you check the box on the form for this option. Businesses that are approved will receive the grant within three days of approval by the SBA (note that this is not the same thing as three days after submitting the application - we're hearing reports that the loans are taking three weeks to process in many cases). This is the fastest way for businesses to obtain relief at this point. Organizations that apply for an EIDL loan can still receive the grant money even if they aren’t approved for the full loan.
The rest of the EIDL loan, which caps out at $2 million, is not forgivable but can be more flexible than PPP in the types of expenses it covers. It can be used for rent and mortgage payments, salaries (or net income if you are self-employed), workers’ paid leave, and the business’s operational needs.
You can apply for the EIDL directly on the SBA website at this link. You will need two main numbers from your bookkeeping - your gross revenue, and your costs of goods sold (or cost of services, if you are a service provider).
The Paycheck Protection Program
You can apply for the Paycheck Protection Program through a bank or other participating financial institution, but not through the SBA directly. The PPP provides SBA loans of up to $10 million to small businesses, nonprofits, sole proprietors, independent contractors, and self-employed individuals. Most importantly, these loans may be forgiven if you maintain your payroll during the Coronavirus crisis or restore your payrolls afterward. For sole proprietors, independent contractors, and self-employed individuals, our understanding at this time is that you determine your payroll based on your net profit using Line 31 on your Schedule C form. For more on that, read this guide to Self-Employment and the PPP, and consult with your CPA and financial institution.
The PPP provides funds to pay up to 8 weeks of payroll costs (or net profit for the self-employed) including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. This is a narrower set of uses than the EIDL. The funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities. But at least 75% of the forgiven amount must be used for payroll. For any amount that is not forgiven, the loan repayments will be deferred for six months.
There are some other important stipulations to have the loan be completely forgiven: the business must not lay off workers or must rehire already laid-off workers by June 30, 2020. If a business lays off workers and does not rehire them, a portion of the loan will not be forgiven. If a business reduces the wages it pays out to a worker by more than 25 percent during the time that it is using the loan, part of the loan will not be forgiven.
Small businesses and sole proprietors were allowed to begin applying for the PPP on Friday, April 3. Independent contractors and self-employed individuals can apply beginning on Friday, April 10. No collateral or personal guarantees are required. There are no fees associated with the loans. The program is open until June 30, 2020, but the government is advising borrowers to apply as soon as possible before the program’s funding runs out.
The SBA has a search tool to help you find a bank that offers PPP loans. Or contact the bank where you do business - many financial institutions are giving priority to their existing customers.
For more information, the US Chamber of Commerce has a guide to the PPP.
Can I Apply for Both the EIDL and the PPP?
Yes, you can apply for both programs. But you are not allowed to “double-dip” - you cannot claim the same expenses for both loans. However, you can use them together - for example, using one source for 6 weeks of payroll, and the other source for the remaining 2 weeks of payroll.
What If I Have More Than One Business?
You can apply for relief separately for each business you own, as long as the businesses have different EIN numbers and independent bookkeeping. If you are self-employed and use your social security number, you may want to check with the SBA or a financial institution for expert guidance.
Other Sources of Help
There are a variety of other state and federal programs that offer help, in some cases for specific types of businesses.
For our Arkansas clients, there are two additional programs:
Arkansas Quick Action Loan Program – Funds from the Governor’s Quick Action Closing Fund have been earmarked for loans to small and medium-sized companies that are in the supply chain of essential goods and services. This includes healthcare, food manufacturing, and logistics. Eligible companies may apply for a loan or loan guaranty of up to $250,000. For more information, contact the Arkansas Economic Development Commission by email, COVID19.firstname.lastname@example.org, or phone, 501.682.1121 or 1.800.ARKANSAS (toll-free).
Women-Owned Businesses - the Women’s Foundation of Arkansas has established a fund to provide grants up to $5,000 to women-owned small businesses experiencing hardship due to COVID-19. Apply by April 13 to be considered for the first round of funding.
You can find out more about state programs in Arkansas at the Arkansas Economic Development Commission website.
As the pandemic has forced people into social distancing, more people than ever are shopping and spending time online. As a result, Digital Marketing is more important than ever.
Facebook is offering a Small Business Grant Program in certain areas, including for our San Francisco Bay Area clients. The program includes cash grants and ad credits. The grants can be used to connect with customers, keep your workforce going strong, help with your rent costs, and cover operational costs.
To qualify, you must:
- have between 2 and 50 employees
- have been in business for over a year
- Have experienced challenges from COVID-19
- Be in or near a location where Facebook operates
You can find a list of all eligible locations on Facebook’s website.
Strengthen Your Digital Marketing!
We’re pleased to provide you with this list of resources to help you and your organization navigate the COVID-19 pandemic.
Digital marketing is more important than ever in this changing environment. Please reach out to us here at Blue Star Business Services if you need assistance with:
- taking parts of your business online
- ramping up your presence in Google Search (SEO), or social media marketing
- bringing your events and fundraisers to a live-streaming online audience
- email marketing, direct mail, and more!
We’re here to help you grow and succeed!
All the best,
Evelyn Rios Stafford and Bob Stafford
Blue Star Business Services