As the CPG and retail industries continue to fight this crisis, we have some good news to share. Congress recently passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act that offers a number of programs and initiatives intended to support businesses with whatever needs they may have right now as they are impacted by the coronavirus pandemic. We want to continuously support you and your business, so we’re breaking down this $2 trillion stimulus package so you can see how your businesses can get help during this difficult time. Please note if you do need assistance, you’re going to want to act quickly for consideration.
What is the CARES Act?
The CARES Act is a $2 trillion stimulus package focused on relieving small- and medium-sized businesses from hardship during the pandemic.
How does the $2 trillion break down?
The set amount for this act is broken into seven main groups. Those groups are:
- Individuals (estimated $560 billion)
- Big corporations ($500 billion)
- Small businesses ($377 billion)
- State & local governments ($339.8 billion)
- Public health ($153.5 billion)
- Education/other (estimated $43.7 billion)
- Safety net ($26 billion)
What are the relevant sections for small business owners?
The main features for small businesses are emergency grants and forgivable loans for companies with 500 or fewer employees. The goal of these programs is to make it easier for companies to keep employees on the payroll and stay open. Plus individuals across the country are getting some relief as well. These important sections are:
- Funds for small businesses – The $377 billion allocated to small businesses is divided into three different programs including emergency grants ($10 billion), forgivable loans ($350 billion), and relief for existing loans ($17 billion). Emergency grants can provide emergency funds up to $10,000 for small businesses to cover immediate operating costs. Forgivable loan funds were given to the Small Business Administration (SBA) to provide loans of up to $10 million per business to maintain payroll, pay rent, keep workers, mortgages and existing debt, provided workers stay employed until the end of June. Relief for existing loan funds was given to cover six months of payments for small businesses already using SBA loans.
- Direct payments to households – One-time cash payments of $1,200 can be expected for individuals making $75,000 or less and payments will decrease up until an individual earns $99,000 or married couples earning $198,000. Families will get $500 for each kid under age 16. The goal of these payments is to support citizens through hardship and generate shopping demand from consumers. To learn more about these payments, go here.
- Deferred business and income taxes with extended deadlines – Both businesses and individuals have an extended deadline to file taxes by July 15, 2020, and businesses will be able to defer paying their share of 2020 payroll taxes until 2021 and 2022.
- Unemployment benefits – The unemployment plan now includes self-employed people and part-time workers. Those who are unemployed, partly unemployed, or cannot work for a wide variety of COVID-19-related reasons will likely receive benefits and will get an additional $600 per week on top of their state benefit.
There are two loan options you might consider for your business. Those options are:
The Economic Injury Disaster Loan (EIDL)
Economic injury disaster loans are grants that provide an emergency advance of up to $10,000 (that does not need to be paid back) to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan. This option is great for smaller businesses that require less cash and/or businesses that need immediate cash assistance.
- Who is eligible for an EIDL? Sole proprietorships, with or without employees, independent contractors, cooperatives and employee-owned businesses, tribal small businesses with 500 or fewer employees. The business needs to have been in operation since January 30, 2020, when the health crisis was announced.
- How do I apply and what will I need to apply? To apply for a grant, you can apply online through the SBA’s application portal and it will take about 3 weeks for approval and payment. Be ready with your credit score and self-certification form.
- What if I am unfamiliar with the EIDL process? Is there help applying? Yes, the SBA offices and their resource partners are available to guide business owners through the EIDL application process.
The Paycheck Protection Program (PPP)
The Paycheck Protection Program (PPP) loan provides short-term cash flow assistance through 100% federally guaranteed loans to businesses and their employers who maintain their payroll during this emergency. The loans made by the SBA and the federal government will be forgiven if the employer is able to keep workers employed during the pandemic. PPP loans must be made during the period prior to June 30, 2020, and be considered eligible by the PPP eligible business standards.
- Who is eligible for a PPP loan? Medium-sized businesses and entities that operated on February 15, 2020, small business concerns or any business concern, non-profit organizations, veterans organizations, individuals who operate a sole proprietorship or are self-employed, any business that employs no more than 500 employees per physical business location.
- What can I use the loan proceeds on? Payroll costs, costs related to group health care benefits such as paid sick or family leave, employee salaries, payments of interest on any mortgage, rent, utilities, and interest on any other debt obligations.
- How do I apply and what do I need to apply? To apply for the loan you must go through the SBA or directly with their approved lenders. Please note that the SBA can change this process and rules within 15 days of the legislation. You’ll want your tax returns, resume, loan application history, projected financial statements, business certifications and license, and other key documents proving your business ownership and hardship.
- What if I am unfamiliar with the PPP loan process? Is there help applying? The process is currently lengthy and complex so it is suggested you speak with an approved SBA lender like Wells Fargo before applying.
Depending on your business’s needs, it’s important to consider each option carefully and react quickly for consideration. We understand that this is an overwhelming time for business owners. We’ll continue to share ways on how you can sustain your business during this difficult time along with updates to the CARES Act and industry news and best practices. For more information on guidance and loan resources that can help you through the COVID-19 pandemic, visit the U.S. Small Business Administration.