Recognizing that the pandemic and economic downturn has hurt small businesses, the federal government has a couple of programs designed to make life easier. But, as with all things involving the government, that doesn’t mean getting help is actually easy. Here are some tips for how you might get some government assistance.
Paycheck Protection Program
The Paycheck Protection Program was rolled out as part of the CARES Act in March to help support small businesses; however, if you have a PPP loan, you are probably confused about what’s going on with the program. That’s because the proceedings have been about as clear as mud.
The terms of the original loan agreement promised that small businesses wouldn’t need to pay it back if they used the money for payroll and other approved business expenses—thus turning it into a grant. Now there is a bipartisan proposal on the table to allow automatic PPP loan forgiveness if the amount borrowed is under $150,000. In order to receive forgiveness, businesses would need to sign a letter saying they’d used the money appropriately and agree to an audit.
This approach would forgive 86% of PPP loans immediately, something the banks that administer the PPP funds favor since it would save them time and manpower. However, the forgiveness proposal is caught up in the legislative process; the Senate has announced they will not be considering it until after the election.
So, what’s happening in the meantime? In a word: Nothing. Nada. A big fat zero. (Okay that’s more than a word). This is where it gets confusing…well, more confusing. Very few banks are even considering applications for PPP loan forgiveness until Congress straightens out the mess. The US Department of Treasury has opened up the applications, but banks aren’t moving forward with the process—so loan holders can’t access them.
Theoretically, the first set of loan payments is due December 1, but if you have a PPP loan, there’s not much you can do at this point. Just sit tight and wait for Congress to do something. Fortunately, the worst-case scenario is that you’ll have to fill out a loan forgiveness application now…or later.
Other Government Loan Programs
If you missed the window to apply for PPP—or need additional money—one option is the EIDL loan from the Small Business Administration. This emergency disaster loan program has been around a long time and is designed to help small businesses in areas hit by hurricanes, wildfires or other disasters. However, during COVID-19, the entire country has been declared a disaster area, so any small business is eligible to apply.
Unlike PPP, EIDL funds are not forgivable, but the loan terms are generous: 3.75% fixed for 30 years. Also, unlike PPP, EIDL funds can be used for anything and you can apply for them directly through SBA—without going through a bank. So, if your business needs to borrow money to stay afloat, it’s a good option to consider. You should also look into state and local loan and grant programs for small businesses.
Families First Coronavirus Response Act
The Families First Coronavirus Response Act (FFCRA) implemented emergency leave under Title I of the Department of Labor’s Family and Medical Leave Act (FMLA) and emergency paid sick leave to assist working families facing COVID-19 situations.
Employers are required to provide up to 80 hours of paid sick leave to employees who need to take leave from work because of COVID illness or exposure. Employees who are home caring for a sick family member can be paid 2/3rds of their full salary. But FFCRA allows businesses with fewer than 500 employees to be reimbursed with a tax credit to offset these costs. Businesses with fewer than 50 employees can be exempt from the requirement; however, they must apply for exemption. This regulation is in place until December 31.
Have questions about PPP or any other federal loan program? Contact Office Accomplice for answers!