Paycheck Portion of $2 Trillion Stimulus Package to Lift Small Businesses
The $350 billion small business relief aid in the $2 trillion economic recovery package signed into law today by President Trump is “an impressive amount of money” said Neil Bradley, the U.S. Chamber of Commerce's executive vice president and chief policy officer, on a webinar sponsored jointly by Inc. magazine and the U.S. Chamber of Commerce that aired today ahead of the signing.
The Coronavirus Aid Relief and Economic Security (CARES) Act’s Paycheck Protection Program provides loans to maintain employees on staff and pay other expenses. Loans can also be forgiven if companies meet certain criteria. The Senate passed the stimulus package on March 25, and the House passed it today.
As Bradley noted, the process to obtain these loans is very streamlined. “A lot of the programmatic things that folks who are familiar with going through to get a government loan are waived. So, for example, the requirement that you first try to get a loan elsewhere before turning to the government program, that’s completely waived in this legislation.” He also said the requirements to provide a personal guarantee or collateral to secure the loan are waived. Similarly, borrowers only need to have “good faith” attestations that the business needs the money as a result of an economic impact because of the coronavirus.
“It’s really more of a loan that converts to a grant,” he explained. “They are really going to expand the availability of lenders to offer this product. It starts with the seven to eight preferred lenders that are already in this system. They are automatically qualified to begin providing this support. The Treasury Department in conjunction with the Small Business Administration (SBA) are authorized to designate additional lenders to provide these loans. They will take a very broad approach. They will try to make as many lenders as humanly possible in the financial system available to make these loans.” He adds, “this money is going to be getting out the door to qualified small businesses very quickly.”
Sole proprietors, independent contractors and other self-employed individuals are eligible for the loans. Businesses with more than one physical location that employ no more than 500 employees per physical location in certain industries are also eligible. It also includes “501(c)(3) nonprofits, 501(c)(19) veteran’s organizations or Tribal business concern described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees, or the applicable size standard for the industry as provided by SBA, if higher.”
On March 6, the federal government provided $8.3 billion in emergency funding for federal agencies, including $7 billion in disaster assistance loans that the SBA can offer businesses in duress from the coronavirus. The SBA loans will carry an interest rate of 3.75 percent for small businesses without other available means of credit and 2.75 percent for nonprofits. Businesses that have credit available elsewhere are not eligible.
The U.S. Chamber’s new Small Business Loan Guide & Checklist provides guidance in filing for small business or self-employed emergency loans. For more assistance on federal disaster loan assistance check out the SBA's link for businesses impacted by the coronavirus.