How the federal government can help your small business during the COVID-19 pandemic

How the federal government can help your small business during the COVID-19 pandemic

Monzerrath Ortiz

The Coronavirus has left small businesses scrambling to find the economic resources they need to stay afloat.


The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act established the Paycheck Protection Program (PPP) and expanded funding for the Economic Injury Disaster Loan Program (EIDL).


One-third of small businesses have already applied for the Paycheck Protection Program from the U.S. Small Business Administration (SBA) and thousands more are expected to apply in the coming weeks. 


The SBA has enacted and expanded other loan programs to attempt to meet the high demand for small business funding and relief.  


Here, we explain different federal assistance programs available to small businesses during this time of crisis. 


Since PPPs cover most businesses, we’ve explained them in more detail than the others. 


What is the Small Business Paycheck Protection Program (PPP)?


The Paycheck Protection Program provides loans of up to $10 million intended to help businesses pay their employees, rent or mortgage, and utilities.


Through this program, small businesses may possibly qualify for up to 100% loan forgiveness. 


Loan forgiveness depends on small businesses keeping all employees on payroll without decreasing salaries and wages for eight weeks. At least 75% of funds should be used for payroll in order to qualify for forgiveness.


PPP loans have two-year maturity and a 1% interest rate, and payments are deferred for 6 months to one year.


Who can get a PPP? 


Small businesses, nonprofits, veterans organizations, and tribal businesses with less than 500 or less employees residing in the U.S. qualify for the PPP.


Find out more about eligibility by visiting the SBA’s page on PPP loans


How can you apply for a PPP? 


The SBA borrower application is currently available until June 30. 


Participating lenders may have their own additional application and paperwork requirements, so you should contact a qualified lender in your state to begin the application process.


It’s important to know you might have to wait a while before receiving a PPP loan.


Many businesses are still waiting to receive their loan after submitting applications in late April. 


One more thing to note is that participating in the PPP may impact your eligibility for unemployment benefits and assistance programs authorized in the CARES Act.


What is an Economic Injury Disaster Loan (EIDL)?


The Economic Injury Disaster Loan is a program that intends to provide fast assistance to businesses currently experiencing loss of revenue. This program offers up to $2 million loans, 30-year terms, a 3.75% interest rate for small businesses, and 2.75% interest rate for nonprofits.


Unlike PPP loans, EIDLs can be used to cover a broader range of expenses, which are outlined by the SBA here.


Additionally, businesses applying for EIDLs have the option to apply for an emergency $10,000 grant. EIDL grants do not need to be repaid and have no prepayment fees.


Due to high demand and limited funds, EIDL applications are currently only available to agricultural businesses.


Eligible businesses can apply for an EIDL here


What is the SBA Express Bridge Loan Pilot Program?


The SBA’s Express Bridge Loan program helps small businesses across the nation access expedited loans of up to $25,000.


The program was recently expanded due to the COVID-19 pandemic and can be received by businesses awaiting an EIDL decision or disbursement. 


Express Bridge Loans, according to the SBA, “can be used to bridge the gap while applying for a direct SBA Economic Injury Disaster Loan.”


Express Bridge Loans must be repaid in full or if approved, in parts from the EIDL loan.


Express Bridge Loans are only available to small businesses with an established relationship with an SBA Express Lender.  To find out if you can get an SBA Express Bridge Loan, contact your current bank. 


What is SBA Debt Relief?


The SBA Debt Relief program provides immediate assistance to small businesses with non-disaster SBA loans, specifically 7(a), 504, and microloans. Under this program, SBA will cover all payments on these loans, including principal, interest, and other fees, for 6 months.


Debt Relief is also available to small businesses taking out a qualifying SBA loan within 6 months of the President signing the bill into law (or until September 27, 2020).


Small businesses participating in this program can still apply for and receive a PPP loan.


To qualify for SBA Debt Relief, businesses must currently hold a 7(a), 504, or Microloans.


Businesses are also eligible if they obtain a new 7(a), 504, or Microloans before September 27, 2020 


If you are eligible, debt relief is automatically applied by the SBA and no action is required.


If you’re unsure about whether you qualify, the best thing to do is contact your lender. 


What is the Mainstreet Lending Program?


This Mainstreet Lending initiative aims to provide support to small and medium-sized businesses by providing 4-year loans with interest and principal payments deferred for one year.


The Federal Reserve expects to launch the Mainstreet Lending Program in early June, but an exact date has not been confirmed


The minimum loan amount for small businesses is $500,000. 


In order to be eligible, small businesses must:

  • Have been established prior to March 13, 2020
  • Be eligible for SBA loans
  • Have less than 15,000 employees or 2019 revenue of less than $5 billion
  • Have not participated in the Primary Market Corporate Credit Facility (PMCCF)
  • Have not received support pursuant to the CARES Act 

For more information on borrower and lender eligibility, you can check out the Federal Reserve’s Mainstreet Lending FAQs.


For additional information about small business relief, federal aid, and eligible lenders, visit LawChamps' Small Business Administration page.


This article is intended to convey generally useful information only and does not constitute legal advice. Any opinions expressed are solely those of the author, not LawChamps.

Monzerrath Ortiz

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