Want to know more about the US Stimulus Package in response to COVID-19 and how your small business can benefit? Here is our break down.
The U.S. recently passed a $2 trillion stimulus package. After analyzing the bill, we’re outlining two specific funding options that all U.S. small business owners might want to look into:
Payment Protection Program (PPP)
What is the US Stimulus Package?
- The U.S. is giving out $349 billion in 100% forgivable loans to small businesses employing below 500 employees.
- The intent of PPP funds is to provide resources to small businesses to allow them to keep their employees on payroll between now and the end of June 2020.
How much money can I receive as part of the US Stimulus Package?
- Loans equal 2.5X monthly payroll expenses for full-time employees up to $10 million, with salaries capped at $100,000 per employee in determining loan amounts.
- Any prior proceeds from EIDL Grant funds against claims to cover these expenses will be reduced from the PPP available lending ceiling.
What are the benefits of the US Stimulus Package for small business?
- This loan can be forgiven as long as you maintain your February 15th headcount by June 30th. These funds are used to cover payroll expenses as well as basic operating expenses such as your rent or mortgage.
- This means that if you let some employees go on March 18th, you would either need to rehire them or hire new employees on or before June 30th to meet these requirements.
- If you don’t meet your headcount numbers from February 15th, the loan will convert to a 2 year term at 1% annual percentage rate
- This is a 100% government-guaranteed and has no collateral or personal guarantee required
What can I use the loan for?
- Salaries and other payroll expenses, rent and utilities, mortgage interest and interest on other debt secured before February 15, 2020
How can I apply?
- Application submissions open on Friday, April 3. The process is designed to be easy and takes less than 20 minutes to complete. However, it is first-come, and first-serve, so apply early.
- You can apply through any SBA 7a approved lenders, including most local banks. Check out the full list here.
- To apply, calculate your prior 12 month average monthly wage expense (i.e. reduce individual salary amounts above $100,000 down to the $100,000 cap). You’ll need to exclude taxes and any non-U.S. employees or 1099 contractors.
- Review the sample application and prepare all the information you will need to complete it.
- Keep a close eye on emails from your banker or stalk your bank’s website for online submission applications.
Pro Tip: We suggest you also work with your banker to set-up a specific account to manage the receipt and clear tracking of transactions against any provided funds to maximize your positioning for loan forgiveness.
COVID-19 Economic Injury Disaster Loan (EIDL)
The Small Business Administration issues these loans directly at a low-interest for up to $2 million and a maturity of up to 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay the loans. Applications are now available on the SBA’s website.
How much money can I receive?
- Small business loans up to $2 Million
What are the benefits?
- Unlike PPP, you do have to pay these loans back. However, they are 100% governmentt guaranteed 10-30 year loans at a max interest rate of 4%.
- You may also be eligible for an advance, which is up to a $10,000 grant within 3 days of your application
- No lending fees
What can I use the money for?
Accounts payable, fixed debts, pay down other loans, payroll (if you don’t do the PPP), and other bills due to the economic impacts from the COVID-19 pandemic.
How can I apply?
- Apply directly on the SBA Website https://covid19relief.sba.gov/#/
- Pull together supporting documentation, which includes most recent business tax returns, a personal financial statement, and a schedule of liabilities listing all current debts
- The estimated time to complete a loan application is around 2 hours. w
Want more help with your business finances?
Take control of your business finances while learning and implementing a Xero financial system in your existing business. Access our Financial Foundations for Small Business Course for free through April 17. (normally $199 USD)
- eCommerce Entrepreneurs: How much should you pay yourself? - 18 January, 2021
- When to hire a vCFO - 22 December, 2020
- Actionable Strategies for Improving Your eCommerce Profit Margins - 11 December, 2020