The safety measures and mandatory closures due to COVID-19 hit plenty of businesses, especially small businesses. The outbreak resulted in many small businesses dealing with unprecedented economic disruption, causing many to stop their operations temporarily or for good.
Outgoing President Donald Trump signed into law the CARES Act last March 27, 2020. The Act allotted $376 billion in relief for small businesses and American workers. Apart from the traditional SBA funding programs, the 2020 CARES Act also established temporary funding programs to assist small businesses during the COVID-19 pandemic.
However, as we know, the needs typically outweigh the available resources with these government programs. Therefore, it is important to understand all of your financing options, whether government-funded or not.
Paycheck Protection Program
The U.S. Small Business Administration (SBA) will grant loans of up to $10 million to eligible small businesses. With the Paycheck Protection Program, the SBA can also provide a direct incentive for small businesses to fund their payrolls.
The SBA can forgive Paycheck Protection Program loans if small businesses meet the employee retention criteria and use the loan for eligible expenses.
Other details about the PPP include:
- Paycheck Protection Program loans have an interest rate of one percent (1%).
- Loan payments can be deferred for borrowers who apply for loan forgiveness until the Small Business Administration pays the borrowed amount to the lender.
- Loans issued before June 5 can mature in two years. Loans issued after June 5 have a maturity of five years.
- PPP loans do not require personal guarantees or collateral.
- Private and government lenders will not charge small businesses any fees.
To apply, approach any SBA 7(a) lender or any federally-insured credit union or depository institution. Once you are successfully enrolled in the program, you gain immediate access to the loans.
Economic Injury Disaster Loans
This loan offers funds to small businesses and non-profit organizations struggling with a temporary loss of revenue. The EIDL assists applicants to meet operating expenses and financial obligations that could have been met had a disaster not occurred.
The loan’s terms include:
- 30 years maturity
- 3.75 percent for businesses
- 2.75 for non-profit organizations
- No pre-payment fees or penalties
Even if your business is denied, you can still apply for this grant, which can be used to maintain payroll, pay for employees on sick leave, and other relevant expenses.
SBA Debt Relief
As part of the Small Business Administration’s COVID-19 debt relief efforts, the organization will pay six months of interest, fees, and other operational fees that small businesses owe for all Microloans, 7(a) and 504. This relief, however, is unavailable for EIDL or PPP loans.
Borrowers don’t have to apply for this assistance. It automatically provides the following:
- SBA will make payments with the next payment due on the loan.
- If your loan is currently on deferment, the SBA will pay within the next payment due to the end of the deferment period.
Alternative Funding Options
Although the U.S. government is working to help small businesses with funds once again, this can take time – lots of time.
At Probably we offer working capital loans and small business loans to small business owners without the wait or snags, up to $500,00 0 in as little as one business day.