Small Business Financial Relief Options
March 27, 2020
4:30 PM CST
In response to the novel coronavirus (COVID-19) pandemic affecting the business community across the country, the U.S. government has announced several disaster-related expansions to small business financial relief options. These programs include:
- Coronavirus Aid, Relief, and Economic Stability (CARES) Act 2020: Business Interruption Loans
- SBA Economic Injury Disaster Loan (EIDL)
- SBA Express Bridge Loan
- Unemployment Insurance (UI) Expansion
Highlights of each of these small business relief measures are included below.
Coronavirus Aid, Relief, and Economic Stability (CARES) Act 2020
Today, March 27, 2020, President Trump has signed into law the Coronavirus Aid, Relief, and Economic Stability (CARES) Act in response to the ongoing COVID-19 pandemic. In addition to the relief available through the SBA, the CARES Act establishes new Business Interruption Loans (Paycheck Protection Loan (PPL)). The covered period for these loans is February 15, 2020 through June 30, 2020.
- Maximum Loan Amount: $10 million, or equal to 2.5 times the business’s monthly payroll costs
- Annual Interest Rate: Cannot exceed 4%
PPLs will provide support for payroll, including sick, medical, and family leave, as well as continuation of group health plans. In addition, loan funds can also be used for mortgage payments, rent, utilities, or other debt obligations that occurred before March 1, 2020.
In some circumstances, portions of a PPL can be forgiven. However, it is important to note that there are restrictions on the forgivable nature of the loan based on maintaining a certain percentage of payroll. At this time, current guidance indicates that businesses with no more than 500 total employees (regardless of full-time or part-time status) are eligible for these programs.
CARES Act loans will be accessed directly through approved lenders. Although HBE is available to help you gather the information you may need for the application process, you must contact your bank for specific assistance for these loans.
SBA Economic Injury Disaster Loan (EIDL)
The EIDL assistance declaration that was issued by the SBA makes loans available to small businesses and private, non-profit organizations in designated areas of a state or territory to help alleviate economic injury caused by COVID-19. The SBA approved assistance requests from Nebraska and Iowa on March 20, 2020.
EIDLs are available for “affected businesses” to help them pay bills and other expenses during the period of time when their business is disrupted due to the pandemic. These loans may be used for fixed debts, payroll, accounts payable, and other bills that cannot be paid. The loans cannot, however, be used to refinance long-term debts.
- Maximum Loan Amount: $2 million
- Loan Term: Up to 30 years
- Annual Interest Rates: 3.75% for businesses; 2.75% for non-profits
- SBA Turnaround Time: It is expected that it will take 21-31 days after an application is approved for funds to be disbursed.
If you plan to apply for an EIDL, it is important that you begin gathering the required information for the loan application. We strongly encourage you to work with your advisors as you start this process. HBE has packets available with the list of the items you will need, as well as the necessary forms. We also have a team of professionals who have been designated to assist our clients through the SBA loan process. This team is being led by Zach Lundak, who can be reached by phone at (402) 423-4343.
In addition to your CPA, you will also need to consult with your banker and possibly your attorney. A discussion with your banker will be of particular importance for short-term relief while your EIDL application is in process.
EIDL loans are accessed directly through the SBA. Application materials can be found at https://disasterloan.sba.gov/apply-for-disaster-loan/index.html. At this time, the SBA is recommending that completed applications be uploaded or mailed.
SBA Express Bridge Loan
The SBA Express Bridge Loan (EBL) pilot program became effective on March 25, 2020. This program allows SBA Express lenders to provide SBA-guaranteed financing on an emergency basis for disaster-related purposes to eligible borrowers while long-term financing (including EIDLs) is in process.
- Maximum Loan Amount: $25,000
- Loan Term: Up to 7 years
- Annual Interest Rates: Lenders and borrowers can negotiate the interest rate, but it may not exceed the SBA maximum
These loans are accessed directly through approved lenders, require less paperwork, and can be paid back using funds from an EIDL. However, due to the risks associated with the streamlined underwriting process, you must have an existing banking relationship with an SBA Express lender when you apply. Please contact your bank to determine whether they are an approved SBA Express lender.
Unemployment Insurance (UI) Expansion
The CARES Act also includes expansion of both the length and amount of unemployment insurance (UI) available through December 31, 2020, under the Pandemic Unemployment Assistance Program. This program provides covered individuals with unemployment benefit assistance when they are not entitled to any other unemployment compensation or waiting period credit. This UI expansion includes coverage for gig workers, independent contractors, and individuals who are self-employed.
Workers who are furloughed – but not actually laid off – are eligible for unemployment benefits. This means that these workers can remain on their company’s benefits plan and keep their company health insurance, while still being eligible for UI weekly benefits, which are paid through the states.
In addition to regular state unemployment insurance, individuals will receive an additional $600 per week for up to four months. In total, unemployed workers will be eligible to receive 39 weeks or unemployment benefits, which will carry them through the end of 2020.
Traditionally, most states have imposed a seven-day waiting period before newly unemployed workers could start receiving their unemployment benefits. In the new stimulus package, however, the Federal government is stepping in to provide full funding for that first week, should states elect to waive the waiting period.
HBE is Here to Help
If your business has been negatively impacted by the ongoing COVID-19 pandemic, we encourage you to act quickly to take advantage of these disaster-related financial relief options. As noted above, HBE has a team of professionals available to assist you as you navigate the complex process of applying for loans and implementing operational changes. While you will likely need specific guidance from your bank on matters related to lending, and from your attorney on labor issues, we are here to help you understand what questions you need to ask and how to best protect your business and its value given the uncertainty of the current economic environment.
For more information or clarification, please contact your HBE advisor.