The Small Business Owner’s Ultimate Guide to Coronavirus SBA Loan Relief

Wondering how you’re going to keep your dream and livelihood alive by keeping your small business above water during the coronavirus pandemic? You’re not alone. Many other small business owners are fighting this same battle right now.

Luckily, it’s something you don’t have to do all alone. Help is available, or at least on the horizon, if you know where to look.

We’ll break down some of the U.S. Small Business Administration programs that you’ll be able to apply to for some financial relief.

Why Small Businesses Are at High Risk

Small businesses have a high failure rate under normal circumstances — 20% will fail in that first year.

Small businesses are generally in a more precarious spot when it comes to setbacks than larger businesses are. Large-scale companies with lots of resources, a loyal and big customer base, and name recognition usually find a way to weather through economic downturns and even recessions.

There are many reasons why small businesses are in greater danger of not surviving than larger businesses during times like these.

  • Lack of capital: Larger businesses already have that capital in place. Small businesses, especially those that didn’t need it initially, may not have access to any resources.
  • Lack of knowledge: Their owners may be new to the business world and less knowledgable about what to do in times of trouble.
  • The owners may already be all in: Some small business owners use their own savings, home equity, and retirement savings to open their business. They might have nothing left to keep their business afloat.

How Long This Outbreak Might Last

Even the experts have no idea how long this pandemic might last. There’s no easy answer to that question, but most experts agree the threat will be here for at least several more months.

And how soon the economy will rebound after that is anyone’s guess. To be on the safe side, small business owners might want to plan on feeling the harsher effects for up to 18 months.

But, at this point, it’s too soon to tell when the economy might fully normalize.

Since this strain of coronavirus is new, it’s hard to guess what it will continue to do. Experts aren’t sure if it will start to die off once the weather gets warmer.

They aren’t sure if the people who have already have had it will have some immunity or if they could potentially contract the virus again.

Since the experts can’t tell you for sure what will happen, as a business owner, you have to prepare for the worst-case situation you can think of. It’s always better to have multiple back-up plans than to be caught totally unaware.

Even if you’re not sure at this point whether your small business will need financial relief, it’s good to have a plan ready. That way, if you see a quick downturn of money coming in, you’ll know what steps to take.

Types of SBA Loan Relief Available

If you’re wondering how to stay afloat right now, there are resources developed specifically to deal with the COVID-19 situation.

These resources are available to you as a small business owner. Let’s look over some of the options that might help you during this difficult time.

Paycheck Protection Program

The CARES Act, which stands for Coranavirus Aid, Relief, and Economic Security Act, was signed into law by U.S. President Donald Trump on March 27 of this year. The comprehensive relief package included a lot of relief money for small businesses, including the Paycheck Protection Program.

The Paycheck Protection Program has become a highly-anticipated lifeline for many small business owners who are worried they’ll lose the American dream they’ve worked so hard to obtain.

Money that you don’t have to pay back is always the best kind to receive, and this program promises plenty of that for small business owners who comply with the conditions.

Under this program, up to $349 billion has been earmarked to use for job retention and additional expenses. This helps small business owners, but also the people who work for them.

The intent of this loan is to help businesses retain their employees — the goal is keeping jobs safe.

This program allows for:

  • Recipients who qualify to receive a loan for as much as $10 million. The amount would be based on eight weeks of prior payroll averages, as well as an extra 25 percent of that total.
  • Forgivement of the part of the loan proceeds which go toward paying the first eight weeks of payroll, as well as some additional expenses, after the loan origination. But to qualify for this, you must keep your workforce.
  • A deferment of loan payments for a period of six months.

How to Apply

To apply, you’ll go through one of these sources:

  • A depository institution that’s federally-insured.
  • A credit union, but it must also be federally insured.
  • A SBA 7(a) lender.
  • A participating Farm Credit Systerm institution.

How Long Will Applications Be Accepted?

This program is slated right now to continue through June 30, 2020. The application process opened on April 3.

If you want to apply for a loan, it’s smart to do it as soon as possible. There is no guarantee how quickly the $349 billion that has been allocated will last since a huge number of applications are expected.

Although there is talk of another stimulus package in the future, you don’t want to bank your future on that happening. It’s too risky to assume it will come through.

Take advantage of the lifelines you’re being thrown now by applying as soon as you can.

Another reason you’ll want to apply rapidly is that it will likely take a considerable amount of time for decision-makers to weed through all those applications they do receive. The faster you get your application in, the sooner it will be reviewed.

Don’t count on the loan processing effort to move quickly — expect delays and plan accordingly.

Who Is It Open To?

The Paycheck Protection Program is designed for businesses with fewer than 500 employees. It can also be applied to by 501(c)(19) veterans organizations and private non-profit organizations.

If you have more than 500 workers, it doesn’t mean you automatically don’t qualify, though. According to the program, particular industries can have over 500 employees, as long as they fall into the SBA’s size standards for that type of business.

There is a handy tool you can utilize online to figure out if your company is considered a small business. Keep in mind that what is considered small can vary according to the industry type. The size standards are generally determined by the number of workers or the annual receipts on average.

Who Will Have Their Loans Forgiven?

The loan will be forgiven entirely if the money you receive through this program is spent on payrolls costs, or on interest for mortgage, rent, or utilities. You’ll need to have spent a minimum of 75 percent of the amount that will be forgiven on payroll costs.

What Are Some Other Loan Details to Consider?

Any loan payments will offer a six-month deferment. And if you’re worried about risking your own personal assets at such a stressful and trying time, you’ll be relieved to know you don’t have to.

Personal guarantees and collateral aren’t necessary to qualify for the loan.

There won’t be any fees on the loans either, although they will carry a 1% interest rate. The loans will have a 2-year maturity.

Economic Injury Disaster Loan Emergency Advance

Are you a business owner who needs money fast to keep your head above water?

While it likely won’t be enough to solve all your problems, you may be able to receive an Economic Injury Disaster Loan advance that could be as much as $10,000. This advance is for small business owners who are facing a temporary loss of revenue because of COVID-19.

You won’t have to repay the Economic Injury Disaster Loan (EIDL), and it’s expected that it could reach you within days of a successful application.

As with the Paycheck Protection Program, this option is for any business that meets the SBA’s size standards. Go here to apply.

SBA Debt Relief

If you have a current 504, 7(a), or microloan, the SBA will cover the fees, interest, and principal automatically for six months. It will do the same for new ones that are taken out before Sept. 27, 2020.

Do you have a current SBA Serviced Disaster loan that had the status of “regular servicing” this year on March 1? If so, you’ll receive an automatic deferment until the end of the year.

That means interest will still accrue, but you won’t owe payment. You’ll keep getting the monthly statements that will let you know when payments begin again.

If you’d rather keep paying through the automatic deferment period, you can. If your business hasn’t been terribly affected by coronavirus yet, this might be a wise course of action.

But it might not be a terrible idea to hold off on these payments in the event you see a later downturn. If you save the money you would normally be making toward your payment, you’d have more cash to fall back on if your business takes a sudden dive.

That might give you a lot of peace of mind as a business owner.

SBA Express Bridge Loan

Are you a small business owner who has a current business relationship with an SBA Express Lender? Then you might be able to get $25,000 rapidly to help with your hardship.

This loan can be used as a term loan. It can also be one way to stay afloat while waiting for a SBA EIDL. These loans are meant to provide a bridge until business owners can access the other money available.

If you opt for this loan, keep in mind you’re expected to repay it in whole, or at least partially, with the money you later receive from the EIDL. Remember, this loan is designed for business owners who need a quick infusion of cash.

Stimulus Checks

Ordinary citizens, whether they are business owners or not, are slated to receive stimulus money as well.

If you’re an unmarried business owner with an adjusted gross income of up to $75,000, you will receive $1,200 in stimulus money.

If you earned between $75,000 to $99,009, you’ll receive a reduced amount, based on how much you earned. If you earned over $99,000, you won’t receive stimulus money.

If you’re married, both you and your partner are slated to receive a combined total of $2,400, depending upon how much you earned. To get the full amount, you’ll need to remain under $150,000 in combined income.

If you have children who are under the age of 17, you’ll receive $500 for each child.

Although this amount may not be a windfall when it comes to keeping your business solvent, every little bit does help. You get to choose what to do with this money — you can funnel it toward your business, paying off personal debt, putting in your savings, or spending.

The first of the stimulus payments are expected to be sent out in mid-April. It could be much longer before some people receive their money if they are having their checks mailed to them.

What You Can Do As a Business Owner to Fight Coronavirus

While the financial damage has likely already impacted you and your small business, it’s not at its worst yet.

Certain parts of the United States, such as New York, continue to be hammered by intense outbreaks of COVID-19. Other cities and states haven’t been hit as hard yet, but likely will in the coming weeks, depending upon how the country does as a whole with its social distancing measures.

As a business owner, you can do your part to reduce the spread of COVID-19.

If everyone takes appropriate measures, the country can drastically reduce how long this outbreak will last. And life, and business, can get back to normal as soon as possible.

Here is what you can do to help prevent the spread of the virus:

  • Encouraging sick employees to stay home: Although there are COVID-19 tests available, they can be hard to obtain — there aren’t enough to go around. If your employees say they are sick, require that they stay home for a two-week period at least to ensure they aren’t spreading COVID-19.
  • Clean and sanitize: Step up your normal efforts to ensure your business is as sanitary as possible. That may require you to close early so you have extra cleaning time each night.
  • Consider the use of masks: Health officials at first said the general public doesn’t need masks, but some have now started to realize masks would be useful for the general public. Masks could protect your employees and the public who utilize your business in person.

What Other Measures Struggling Businesses Can Take

Look for any way you can serve the public during this time. The country has seen hotels double as makeshift hospitals.

While that might not be bringing in money for the hotels, it is building goodwill. Customers will remember that kind of thing.

Other businesses are working hard to do what they can to help the public and stay relevant during this changing time.

Restaurants aren’t open, but they can deliver. Therapists are canceling one-on-one sessions, but they can have online sessions.

It may be time to get creative and find new ways for your business to help their customers.

Here are some simple ideas you can try:

  • Increase your social media presence: This will help people remember you’re still there and that you still care. If you have a website, keep it updated about how coronavirus is impacting your company.
  • Let customers know if you’re still open: If you’re still open despite the coronavirus, tell clients how you’re safeguarding your employees and the public.
  • Protect your cash flow: Keep your cash flow as strong as possible by cutting things like advertising budgets and selling existing stock that you have in your inventory, even if it’s at a small loss.
  • Ask your employees for ideas: It creates a sense of teamwork and ownership to make the idea succeed. They may have some great, money- or goodwill-generating ideas if you take the time to listen. They’ll be motivated to help you succeed because it will also be helping to protect their jobs.
  • Be a positive leader: It can be hard to keep your spirits up. But if you have a good attitude, it might rub off on your customers and employees. Remember, this won’t last forever.

You Can Get Through This

There is no sugarcoating the fact that your small business may have a tough road ahead in the coming year, and possibly even beyond. But, if you keep a clear head, stay up-to-date on the facts, and take advantage of the SBA loan relief available to you, you’ll come out stronger than ever.

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