I want to talk about two programs that are part of the CARE Act Stimulus Package, which was just passed by Congress, designed to help small business owners.
I am a small business owner. My entire community is made up of small business owners. My clients are small business owners, and I just have a special place in my heart for those of us trying to weather this storm. And if there is help available, I want to share it.
I had the pleasure of being part of a two-hour long call, video call this week with a gentleman who is a CPA/attorney. I know, super-smart guy. It was incredibly informative and I want to just share that information with you.
Let me preface by saying, I am not a CPA or an attorney. I am not your banker. I am just a realtor sharing information. I am not giving advice. I’m sharing information, so take it as you will.
Fun fact, there are 30 million small businesses in the United States of America, and only 6 million of them have two or more employees. So the balance, that 24 million small businesses, are people just like me, independent realtors, independent contractors, sole proprietorships, small businesses that don’t have any employees. Though I get a lot of help in my business, I don’t have any employees on the payroll, unless you count my adorable dog that’s lying in her bed behind me as we speak. She’s a very good assistant.
The CARE Act that was passed last week by Congress, carved out $350 billion to help small businesses weather the economic downturn that we are experiencing as a result of coronavirus. There are two programs in particular. There are about eight different ways you can take advantage and benefit from the programs that are available, but the two programs in particular that I want to talk about today are just incredible and can be a real help to a lot of us that are in this situation.
Two programs are the EIDL, E-I-D-L, which stands for Economic Injury Disaster Loan, and P-P-P, the Payroll Protection Program.
Economic Disaster Loan Program (EIDL)
EIDL has actually been on the books for quite some time and is designed as a loan program to help those who are impacted by declared disasters. The interesting thing about the world we are living in right now is the entire United States is now a declared disaster zone. So this loan program is now available to everyone.
So let’s talk about it. It is available to small business owners. How does the SBA designate a small business?
- If you have 500 or fewer employees
- An individual who operates as an independent contractor, a sole proprietorship, or consider yourself self-employed
- most private non-profits
with one caveat, the business had to be started prior to January 31st of this year. So you can’t start a new business in an economic downturn and take advantage of this loan program. Actually you can’t do that with either of these loan programs.
The max loan amount on EIDL is $2 million with a rate of 3.75% for businesses, 2.75% for nonprofits. It is on a 30-year term and payments can be deferred for a year. Up to $200,000 can be approved without a personal guarantee, and if your loan is less than $25,000, there’s no collateral required.
I talked to a CPA yesterday and his advice kind of fell in line with the advice that I received earlier this week, which was the EIDL program can be used to cover the cost for things like a mortgage, rent, lost rent, utilities, independent contractors that support your business, software and business costs not associated with payroll.
The kicker to this program is there is an emergency grant component that allows you to receive $10,000 as a grant within three days of application. They direct deposit it into your bank account. And there is no obligation to repay the grant. The grant is not tied to your loan approval for the EIDL loan.
To apply for EIDL is to go to sba.gov/disaster. It’s about a two-page application. Super quick. I went through it the other day just because I was curious about what the process was. It took me less than five minutes. You do need to know what your gross revenue and your cost of goods sold were for 2019. There are about two pages of questions like I said, and at the end of it, they literally ask for your bank routing and account information so that they can direct deposit that $10,000 emergency grant.
Here’s a guide with everything you need to know to educate yourself further on the EIDL loan
Payroll Protection program (PPP)
The second program that I want to talk about today is the Payroll Protection Program and it is exactly what it says. This program is designed to help employers maintain and keep their employees on staff and pay them while we weather this storm.
The same small business guidelines apply
- If you have 500 or fewer employees
- An individual who operates as an independent contractor, a sole proprietorship, or consider yourself self-employed
- Most private non-profits
The loan amount for this program can be up to 2.5 times the borrower’s average monthly payroll costs, up to $10 million. What are payroll costs? That includes salary, commissions, cash tip equivalence, payment for vacation, FMLA, any payments made towards employee health benefits, including premiums, as well as payments towards retirement benefits or state and local taxes associated with payroll.
For a sole proprietor or an independent contractor, that includes wages, commissions, income, net earnings, capped at $100,000 annually.
The loan for the PPP is at a 1% interest rate (increased from .5% after the recording of this video). All payments are deferred for six months. It must be repaid within two years, but there is no prepayment penalty and there’s no personal guarantee or collateral required for this loan.
Here’s the kicker. The entire loan can be forgiven if it is spent on items in the following categories within an eight week period.
- payroll costs
- interest on mortgage obligations that were incurred during normal business prior to February 15th
- any rent under lease agreements that were in force prior to February 15th
- any utility payments (electricity, water, gas, transportation, phone, internet) billed prior to February 15th
There’s one small detail associated with that though. Because it’s the Payroll Protection Program, no more than 25% of that can be spent on things other than payroll in order to qualify to be forgiven (the original law stated 50%, but it was later changed by the Treasury Department, so this could change.) There are some additional rules around that. All of the information is included in this guide.
Again, I’m giving you the information. I am not giving you any advice.
Here’s an FAQ from the Treasury Website as well. How to apply for the PPP. This one is a little bit different from EIDL. This loan is being processed by SBA-approved lenders.
What I am hearing, specifically in the last 24 hours, is the banks may not be in a position to keep up with the enormous demand that they are anticipating. If you have a local bank that you already have an existing banking relationship with, that’s going to be your best place to start.
And the other positive or perk to going to your local community bank where you already have a business banking relationship is they already have a lot of the information that will be required as part of the loan application. So that is your best bet.
As of Friday, April 3rd, small businesses and sole proprietorships can apply. A week from today on April 10th, they’re going to open up applications for independent contractors and self-employed individuals.
If you want me to continue to share information specific to these programs as I receive it, please fill out that form. I want to continue to provide information to you if it’s helpful, but I don’t want to inundate my database with this information as it may not apply.
For More Information
If you receive information or you see an article that might be helpful to the community, please send it to me too so I can share it.
If you have friends and family who are small businesses who are impacted by this situation, please share this video with them. I was lucky enough to be part of a really informational call earlier this week. I don’t think enough people know that this help is out there and how to receive it.
Sharing is Caring
If this can be helpful information to anyone that you know, please share it. We are all in this together and though we are physically distanced, we need to be rooting for and supporting one another now more than ever. I consider myself a huge champion of small business and anything I can do to help support you during this time, please let me know.
Do not hesitate to reach out, shoot me an email, comment on a Facebook post, send me a text or just pick up the phone and call me. I’m more than happy to help.
We will get through this. Best of luck, be well, stay in touch and I’ll talk to you soon 💙
