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HomeBusinessCOVID-19 Related Resources for Small Businesses

COVID-19 Related Resources for Small Businesses

Drive around Murfreesboro, Smyrna, or LaVergne and you will see the same thing, the lack of laughing happy people having a bite to eat with friends, enjoying the sunshine on the patio of a local coffee house, or checking out the newest spring fashions at a downtown boutique. Instead, the trickle of people who are out are taking advantage of curbside food pick-up or staring at the firmly shut doors of many popular small boutiques owned by locals they call friends. This same story is repeated around the country.

We all know that the COVID-19 pandemic is devastating small business, but the relief promised by the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 is finally beginning to trickle out of federal coffers and into the hands of suffering small business owners. It has been hard, as the rules and the paperwork are a moving target, but it looks like things are beginning to head forward.

“The recession of 2008 to 2012 that we worked through is nothing like this,” said Pat Geho, State Executive Director Tennessee Small Business Development Center. “This is massive layoffs and shutdowns that the infrastructure has not been there to handle. But we are ramping up to handle the situation. It is a lot of money to get out to a lot of people quickly. It takes time to build a perfect – or as perfect as possible – system to handle the volume, but time is our enemy right now.”

Geho went on to say that last week the banks and the Small Business Administration got the information they needed to begin to process the loans and emergency funding, and “hit the ground running.”

SBA Economic Injury Disaster Loans

Early last week, the Small Business Administration (SBA) sent out emails from their local offices to interested parties – including Chambers of Commerce – about what is available and how to go about receiving much needed stimulus money. The SBA is now accepting applications for small business disaster relief funding though the SBA Disaster Relief Website at https://disasterloan.sba.gov/ela/. This funding is being administered directly by the SBA with funds issued from the United States Department of the Treasury, and not through local banks or credit unions. It is called an Economic Injury Disaster Loan (EIDL), and will be available to most small businesses with less than 500 employees.

EIDLs are to be used for working capital to keep the business running, not for expansion or debt consolidation. To qualify, a business must show that they have suffered substantial economic injury due to the COVID-19 pandemic and are unable to meet financial obligations such as paying rent, salaries, utilities, and other business expenses. Qualifying applicants will be able to borrow up to two million dollars for 30-years at a fixed rate of 3.75%. Loans under this program that are under $25,000 require no collateral with a good credit rating.

Parties eligible to apply for this opportunity include owners of businesses, private or non-profit; self-employed individuals; independent contractors; and sole proprietors.

EIDL Emergency Grants

The EIDL program will also be offering $10,000 Emergency Cash Grants. These funds are a grant, not a loan, and will not need to be repaid. They can be requested along with a loan. These funds are released three days after the date of application. They are seen as a stop-gap measure. Getting one, however, does not mean the business will receive a loan under this program. And a recent change in the grants provides for $1,000 per employee, up to $10,000.

Paycheck Protection Program Loans

Paycheck Protection Program (PPP) loans are intended to encourage businesses to keep and/or rehire employees by paying payroll costs (except for compensation over $100,000), healthcare benefits, sick leave, medical leave, or family leave. The aim is to give the business enough liquidity to support their employees during the crisis and not lay them off. The funds can also be used to pay insurance premiums, interest on mortgage obligations, rent, and interest payment on debt acquired before February 15, 2020.

This loan program is open to any small business, private or non-profit, veterans service group, or food and hospitality businesses with less than 500 employees, self-employed individuals, independent contractors, and sole proprietors.

Unlike the EIDL, these loans are processed through banks, credit unions, and approved private lenders. There are more than 1,800 SBA approved banks. While this was supposed to begin April 3, local banks were still waiting to get needed information on April 7, but were told that necessary processing information would be available as of April 11. Pay Pal, Quickbooks Capital, and Square Capital have all just been approved to provide these loans.

Loans up to $10 million dollars will be available through the PPP. How much can be borrowed is based on a formula related to previous payroll amounts. Application deadline is June 30, 2020, although this date may be extended by Congress.

Applying for Both Loans

One business may apply for both types of loans, but each type must be used for different expenses. In other words, if the PPP is used to pay employees, then the EIDL must be used to cover other business expenses, such as rent, interest payments, inventory, etc.

Other Small Business Relief

Businesses currently paying on SBA loans will have their payments of principal and interest automatically deferred to December 31,2020. This deferment applies to both disaster home and business loans, as well as SBA-purchased 504 debentures throughout the United States and all United States territories.

This does not mean interest will stop accruing, just that the payment need not be made. If a pre-authorized debit is involved through a financial institution, that draft must be stopped by the borrower.

Making Sense of the Application Processes

With the complex application processes, and changing requirements, the TSBDC is willing and able to help those lost or confused by the process.

“At the TSBDC, we are concentrating on helping those businesses with less than ten employees, and sole proprietors to get their paperwork together,” said Geho. “This is the group that may not have an in-house bookkeeper, or a full-time accountant. Also, many independent contractors in the gig economy do not keep very good records about how they pay themselves, making it hard to track lost income.”

The TSBDC has ramped up their staff to handle the influx of business owners needing help. While they are willing and able to help any sized business with the loan process, Geho says that it is the smaller businesses who are reaching out to them the most.

“Since the tax season has been deferred,” said Geho, “accounting firms are putting their focus on helping their clients with long-time relationships get the information they need to apply for the various loans. They are really working hard for their clients, and they need to be applauded. At the same time, because of the high demand, many are not currently in positions to take on new clients in this context, so we can fill that hole, too.”

More than anything else, Geho stressed that it was important to have a decent set of financials providing relevant information on the forms allowing lenders to access the company’s ability to qualify for one or both loan programs. Bad documentation will need to be fixed, as it will not be helpful in the process.

“We run into a lot of this,” said Geho. “Small businesses need to pull all their records together and see if we can help them generate quality documentation. They need to pull together checkbooks, bank deposit slips, anything and everything that shows what they have been paid, and their expense receipts.”

A representative from the TSBDC is available to help individuals and owners of small businesses gather the necessary information to fill out the applications, and to help them prepare to submit the form. To schedule a time to meet one-on-one (via phone or Zoom), email [email protected]

One other resource, is being provided by Intuit. The company recently launched a program called Intuit Aid Assist, a free website to help small business owners and the self-employed calculate the amount of aid they will be eligible to receive under the CARES Act.

In the process of applying for this funding, be aware that there are many fraudsters trying to make a quick buck with bogus websites and phony email offers, usually asking for a fee or asking for personal information quickly. That is why it is safest to go through the TSBDC.

For more information about what the SBA is doing and the latest updates on funding, check out sba.gov/coronavirus.

Clark Shelton
Clark Shelton
Cark Shelton lived in Franklin, Tn for over 20 years and has been with the company since its first year. Clark’s background in sales, web development and writing gives him the ability to wear many hats. Clark currently splits his time between Franklin and Cancun, Mexico.
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