By Per Peterson
There’s not a business — large or small — in this country that hasn’t been negatively affected by the COVID-19 outbreak, and the federal government is trying to help.
The Small Business Administration and Treasury Department have initiated what the SBA refers to as “a robust mobilization effort of banks and other lending institutions to provide small businesses with the capital they need.”
The CARES (Coronavirus, Aid, Relief and Economic Security) Act established a $349 billion Paycheck Protection Program to provide relief to small businesses struggling to pay their employees. Employers can also use the money to cover other expenses, such as rent, mortgage interest and utility costs over the eight-week period after the loan is made. To qualify, employee and compensation levels must be maintained.
Funds are provided in the form of loans that will be fully forgiven when used for the aforementioned items (at least 75% of the forgiven amount must be used for payroll). Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels; forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease. Loan payments are deferred for six months. No collateral or personal guarantees are required, and neither the government nor lenders will charge small businesses any fees.
Tracy EDA Director Jeff Carpenter said federal agencies have been doing the right thing since COVID-19 emerged, essentially out of nowhere. He said the trick over the last couple of weeks has been how frequently things change.
“It’s like a moving target,” he said. “When programs came out right away, I would send things out, then three days later something new would come out. Now after people who did get their application in there and applied for some of these things … they are putting a time frame on when you can apply for them.”
Carpenter encourages every business to sign up for programs to help them get through these times. Even though a business might not be feeling the pinch now, they might down the road if things don’t turn around with COVID-19.
“What if this lasts three more months?” he said. “We don’t know. If you’re doing well right now that’s great, but what happens in a couple months? Is any of this going to be available then?”
Small businesses with 500 or fewer employees — including non-profits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships and independent contractors — are eligible. Businesses could begin applying late last week; independent contractors and the self-employed can apply beginning April 10.
People can apply through any existing SBA 7(a) lender or through any federally-insured depository institution, federally-insured credit union and any participating Farm Credit System institution.
As Tracy’s EDA Director, Carpenter works closely with businesses and helps people develop new ones. Right now, he’s busy simply helping existing businesses maintain and survive.
“This is not the kind of busy work I want to do,” he said. “What I want to do right now is make sure we retain every business we have in Tracy right now. We have a lot of projects we’re going to be working on in the future, but everything is on hold. I need to work with anybody who has a business right now.”
Only banks that are considered a 7(a) lender can process applications for the new loan programs like PPP loans, which are 100% guaranteed by SBA. Tracy’s Minnwest Bank is a 7(a) lender.
Market President of the Tracy branch, Darcy Carlson, said the bank is committed to working with customers on helping them as much as possible through any loan process they might be pursuing.
“We’ve really stepped up of late at our SBA processing department,” she said. “I don’t think anybody is staffed for all the extra programs and everything else out there, but we’re doing every thing we can and as quickly as we can to make sure our small businesses get the money that’s out there for them.”
Carlson said the next wave of applicants should come Friday, when independent contractors and sole proprietors can being to apply.
“We’re trying to do our part in getting emergency funds that are out there to people who need them,” said Carlson. “The process is a little bit of a challenge because new things are unfolding every day.”
The CARES Act also expands the eligibility for the Economic Injury Disaster Loan (EIDL) Program to include tribal businesses, cooperatives, and ESOPs with fewer than 500 employees. They are also available to all non-profits, sole proprietors, and independent contractors. EIDLs less than $200,000 can now be approved without a personal guarantee; self-employed individuals and small business owners are eligible for a forgivable $10,000 advance on an EIDL to help rapidly cover business expenses.
Other relief is coming for Americans facing economic challenges related to the coronavirus pandemic. The CARES Act is actually a $2.2 trillion congressional stimulus bill aimed at providing support for individuals and businesses across the country. But what does it mean for regular folk? As it turns out, nearly everyone will be affected, even here in the Tracy area. We’ve broken down some of the more important parts of the bill below.
See this week’s Headlight Herald for more on this article.