A recent Harvard Business Review study found that 45 percent of U.S. small businesses are temporarily closed due to COVID-19. With closures come heavy financial strain; the majority of small businesses don’t have more than two month’s worth of cash on hand. With the recent passing of a $2 trillion federal relief bill, also known as the CARES Act, new grants and loans are now available to help small businesses make ends meet. City programs and private institutions are also working on a local level to provide additional support. Read on to discover resources you can access to better support your business and your employees during this pandemic.
Financial Support from the CARES Act
Because construction projects have significant inherent risks and dangers, most states require that contractors obtain a license. Why? Because it’s a way contractors can demonstrate competency in their trade and allots them legal authority to operate a business where they directly supervise risky activities, such as:
Payment Protection Program (PPP):
Offered by the U.S. Small Business Administration, this new loan is designed to help small businesses pay their employees during the COVID-19 pandemic. You can apply for an amount 2.5 times your average monthly payroll; PPP loans have a 1% interest rate. To be eligible for the loan, you will need to prove that your business has been negatively impacted by coronavirus.
One great aspect of the PPP loan is that it can be completely forgiven if you spend at least 75 percent of the money on paying your workers; you also need to use the remaining funds only on mortgage interest, rent, and utilities.
You can apply for this loan directly through the SBA’s website, or you can work with an approved lender. If you have a good relationship with your bank, try reaching out to them first; banks are currently prioritizing their regular customers, and small banks in particular are stepping up to help clients during this pandemic.
It’s estimated that about 100,000 small businesses are currently applying for this loan, so we recommend submitting a PPP loan application as soon as possible.
Economic Injury Disaster Loan (EIDL):
Economic Injury Disaster Loans (EIDL) are designed to provide economic relief to small businesses during disasters, including the COVID-19 pandemic. They can be used to pay for costs like rent, paid leave, and operational expenses. Unlike the PPP loan, this loan is not entirely forgivable. However, you can actually request a $10,000 “advance grant.” This is money you will receive whether or not your loan application is approved, and you will not need to pay it back.
The EIDL permits you to apply for up to $2 million in financial assistance. If you are approved for a loan greater than the $10,000 advance grant, you must pay it back at 3.75% (2.75% for nonprofits) over 10 to 30 years. You can wait a full year before making your first payment.
To apply for an EIDL, head to the SBA website here. The application process takes about two hours. Make sure you have both your personal and business financial information on hand, as well as your business’s federal tax returns. For more information, review this step-by-step visual guide.
Applying for Both Loans
You are allowed to apply for both an EIDL and a PPP loan, but make sure you don’t spend money from both loans on the same expenses; for example, you can’t use both loans to cover payroll costs. Additionally, the $10,000 advance grant from your EIDL will be applied toward how much money you’re forgiven on your PPP loan.
Private Funding Opportunities
Depending on your eligibility, you may be able to access additional financial support from these privately-run programs.
Facebook Small Business Grants
Facebook is offering $100 million in cash grants and advertising credits to support small businesses during the pandemic. To be eligible you need to:
- Be a for-profit company
- Have between 2 and 50 employees
- Have been in business for over a year
- Have experienced challenges from COVID-19
- Be in or near an approved location
Grants for businesses in major U.S. cities such as Austin, San Francisco, Seattle, and Washington D.C. are now available. You can view approved locations in the application guide here.
Google Small Business Support
Google will automatically provide advertising credits to any small business that has had an active Google Ads account over the past year. Small businesses should invest these credits into search campaigns to build and retain their customer base during this time. Credits can be used until the end of 2020.
Local Financial Support
Most U.S. cities are working on a local level to support small businesses. You can view many of these cities’ resources in this guide. Additionally, you can look up your administration’s website (e.g. “Salt Lake City government website”) for a local COVID-19 resource page; many cities will list funding opportunities there.
Check to see if your city is offering support such as:
- Extended tax payment deadlines
- Temporary moratoriums on evictions
- Flexible payment plans for utilities
You can also communicate with your landlord and/or utility providers; many are working with customers who are struggling to make ends meet during this time.
Don’t forget to look into city-based loans and grants! A few examples of resources you may be able to access include:
- Chicago Small Business Resiliency Fund: Provides emergency cash flow to small businesses in the form of low-interest loans. Learn more here.
- NYC Small Business Continuity Loan Fund: Offers zero interest loans of up to $75,000 to small businesses within the five boroughs of NYC. Qualifying businesses must have a sales decrease of 25 percent or more due to COVID-19. Apply online here.
- San Francisco Small Business Emergency Loan Fund: A zero-interest loan of up to $50,000. Repayment schedule and terms will be determined on a case-by-case basis. Applications opened on April 6, 2020; check here for updates.
- Amazon’s Neighborhood Small Business Relief Fund (Seattle only): Small, Seattle-based businesses in service or retail industries (such as restaurants, coffee shops, and beauty salons) are eligible to receive grants of varying amounts. Apply for this fund here.
Support for Your Furloughed, Laid-Off, or Reduced-Pay Employees
Harvard Business Review recommends that small businesses focus on keeping their best employees loyal during this time. Work mutually with your team to find reasonable and effective solutions. For example, you may consider using furloughs rather than layoffs; a furloughed employee can have unemployment eligibility and will be easy to rehire when you’re in a stronger financial position.
If you need to reduce pay for or lay off an employee, be sure to refer them to resources such as:
- Marketplace Health Insurance: Losing employment qualifies you to sign up for health insurance sold on Healthcare.Gov or state marketplaces. Your employees may qualify for subsidized prices or even Medicaid. We recommend shopping for health insurance on Stride; their customizable search tool makes it easy to check for subsidized prices and find the most cost-effective options.
- Unemployment Insurance: Unemployment insurance is a state-run program that pays you cash when you lose your job through no fault of your own. On average, they replace about half of your regular wage for up to 26 weeks when you file for unemployment. Refer your employees to this page to find local unemployment requirements. Remind them that the process for filing unemployment claims may be a little slower right now due to the volume of people applying.
- Government Aid: Depending on their income, employees may be eligible for different forms of federal support, including SNAP (food stamps), rent assistance, and more; reference this list for a variety of programs you can recommend.
Navigating this financial, social, and public health crisis will require smart decision making…and likely some outside help. As you work to lower your costs and figure out how to keep your customers, don’t forget to apply for federal, local, and private funding opportunities. With a little research, you should be able to access loans and grants that can give your business a much needed boost during this stressful time.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.
A business loan agreement is a two-way street; this document protects both you (the borrower) and the lender. Read on for everything you need to know before you sign on the dotted line.