The COVID-19 stimulus package President Donald Trump will likely sign by the end of the week makes billions of dollars available to small businesses across the country, injecting a boost into the lifeblood of the American economy at a crucial moment.
The $2.2 trillion response deal, approved unanimously by the Senate late Wednesday, paves the way for small businesses to acquire grants and loans to cover payroll and other expenses. The bill also lets workers obtain extended and increased unemployment benefits if they are laid off or furloughed.
$10,000 Advances on SBA Loans
The stimulus package makes $10 billion available to provide grants in the form of $10,000 advances to small businesses to cover payroll and other expenses. The advances from the Small Business Administration, known as economic injury disaster loan, should come within three days of applying.
Businesses need not repay the advances, even if applicants are eventually denied a loan.
The bill also authorizes more banks and financial institutions to provide SBA loans, so most SBA members can apply through their current institution.
$17 Billion for Small Business/Economic Development
The package provides $17 billion for “immediate relief” for small businesses that have existing SBA loans, including 7(a) loans for financial assistance and 504 loans for economic development.
The SBA will cover all loan payments for existing borrowers, including principle and interest, for six months. There is also a six-month window after the bill is signed when small businesses can get “protection on payments and forgiveness” on the loans.
The bill also waives fees for veteran small business owners and their spouses who take out 7(a) express loans.
No-Fee Loans Up To $10 Million
For businesses seeking assistance outside the SBA, the stimulus package creates a new $350 billion program offering small businesses no-fee loans up to $10 million.
Businesses can borrow up to 125 percent of average payroll costs over eight weeks, using the money to support payroll plus any other expenses with the 25 percent boost.
These loans are administered directly by banks, and underwriting will essentially be waived. Businesses must simply demonstrate that they were a viable business in early February and show their payroll costs before layoffs across the country began.
Additionally, principal and interest payments are deferred for a year, and if businesses can rehire employees and get their payroll back up to where it was in early February, then the loans can be waived in part or in their entirety.
Expanded Unemployment Package
Unemployment insurance will see both a bump in payments and an expansion for virtually everyone who was employed before COVID-19 ground the economy to a halt.
The package allows furloughed workers to receive their salaries for four months, and adds $600 on top of what state unemployment departments currently provide to impacted workers.
The Association will continue to expand this story as we learn more about the bill.