Apr 14, 2020

How the CARES Act Will Help Small Businesses Bounce Back

The coronavirus outbreak has been a disaster for our nation’s small businesses. Internal research conducted by Lendio reveals that roughly half of small business owners are suffering from the effects.

This percentage increases substantially for businesses in urban areas, which is concerning because of the high concentration of small businesses in affected areas. Likewise, minority business owners have been disproportionately affected. They are twice as likely to be dealing with issues related to coronavirus, which is at least partially explained by the higher levels of diversity in urban areas. Regardless, it’s clear that millions of entrepreneurs are in serious danger.

The Lendio study found that social distancing is playing a significant role in small business struggles, as fewer consumers are visiting business locations. Financial strain related to the crisis is also a factor, as customers have less money on hand and are therefore more reluctant to make purchases.

This is a worst-case scenario for many businesses. And even those that have tried to prepare for emergencies are in danger.

“A lot of you are hurting and simply can’t find support right now,” says personal finance expert Brian Thompson. “You’ve tried your best to prepare for slowdowns […] but you couldn’t have imagined going from 100 to 0 in a matter of hours, leaving you with a lot of bills to pay, including rent and payroll. The median business holds cash reserves to cover 27 days of expenses, according to Chase. But even if you’re well-prepared, with a 3- to 6-month buffer for your business, you still need to plan for what happens if that runs out. No one knows how long this will last. What you need right now is cash.”

A Helping Hand from Washington

The CARES Act is set to offer some serious relief to our nation’s small businesses. The record-breaking stimulus package includes federal disaster loans and many other financial perks intended to provide a lifeline for those in need.

Highlights include:

“The programs and initiatives in the Coronavirus Aid, Relief, and Economic Security

(CARES) Act that was just passed by Congress are intended to assist business

owners with whatever needs they have right now,” explains a small business guide prepared by the US Senate Committee on Small Business & Entrepreneurship. “When implemented, there will be many new resources available for small businesses, as well as certain nonprofits and other employers.”

How to Take Advantage of the Stimulus Plan

To get fast cash that can help you cover immediate expenses, you should apply for an Economic Injury Disaster Loan (EIDL). These low-interest loans are facilitated by the Small Business Administration (SBA) and can connect you with up to $2 million to help your business bounce back. You can use the money to cover the kinds of expenses you would have met if it weren’t for this pandemic. Examples include:

In order to be eligible for one of these COVID-19 loans, you need to own a small business with no more than 500 employees. If you aren’t sure if your business qualifies, use the SBA’s convenient sizing tool.

After you’ve applied for one of these disaster loans, there’s an extra bonus you should definitely take advantage of. The government is currently providing Emergency Economic Injury Grants that provide you with as much as $10,000. And the money never needs to be repaid.

These special grants are earmarked for qualifying small businesses and nonprofit organizations. So if your business has been harmed by the coronavirus outbreak, you should request one of the grants no more than 3 days after you’ve applied for the Economic Injury Disaster Loan.

The grant money is intended to help you take care of pressing financial burdens. If your supply chain has been turned upside down, you could use the $10,000 to help keep production rolling. If you’re having trouble covering payroll and sick leave, that’s another prime use for the money. Basically, anything involving operating costs and business obligations could be fair game for this obligation-free money.

In situations where making payroll will require more resources than provided by an Emergency Economic Injury Grant, consider applying for a Paycheck Protection Program (PPP) loan. You can qualify for up to $10 million for paid sick leave, paid medical leave, insurance premiums, mortgage or rent, and utility payments.

Planning Your Long-Term Recovery

It’s hard to look at the big picture when you have urgent needs like payroll and rent screaming in your face. But once you’ve gotten some short-term relief from the relevant SBA loans and grants, it will be time to think about how your business is going to survive the next month, 6 months, and year.

Part of this process will be reviewing the benefits of the CARES Act to ensure you’ve leveraged every possible benefit to your business. Then you can begin looking for other sources of financial relief. Talk to your landlords, contractors, and employees. By working together to find collaborative solutions, you’ll lay a new foundation for your business that might even be stronger than what you had before this whole coronavirus mess began.

 

While every effort is made to ensure the accuracy of information when a story is published, the coronavirus pandemic and Paycheck Protection Program (PPP) have caused details to change at a rapid pace. Additional guidance from the government may change or clarify certain aspects of the forgiveness process and could result in changes to the information contained in these pages. For the most up-to-date information, please visit the COVID-19 section of our website. For more information, you can call us at (855) 853-6346. Lendio is not responsible for and provides no warranty as to the accuracy of this content. Lendio does not provide legal, accounting or tax advice. The information and services Lendio provides should not be deemed a substitute for the advice of such professionals who can better address your specific concern and situation.

About the author

Grant Olsen
Grant Olsen
Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

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