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Will the Stimulus Package Keep America Afloat?

4 min read • Apr 21, 2020 • Lendio

The CARES Act, the largest economic stimulus package in American history, was signed into law by President Donald Trump on March 27, 2020. CARES, which stands for Coronavirus Aid, Relief, and Economic Securities, allocated $2 trillion to help the economy. But many are wondering how the funding is being dispersed and whether it will be enough to pull the country through the COVID-19 pandemic. 

Moody’s Analytics’ Chief Economist Mark Zandi says that “with the stimulus, the economy would contract by 17.4% in the second quarter, and the chances of a more devastating downturn are sharply reduced.” This forecast means that while there will be a minor downturn, the stimulus will help carry the economy during this time. 

Breaking Down the Package

The entire bill consists of 883 pages and has a lot of granular details that we won’t bore you with. Instead, we’ll highlight the important parts and how they aim to supplement the American economy. 

Personal Funds

Most adults can expect a one-time check for $1,200 for individuals, $2,400 for married couples, and $500 per child in the home—up to 3 children. The goal is to hold Americans over through the quarantines and shelter-in-place orders that are popping up across the country. 

The Healthcare System

As hospitals and healthcare workers are on the frontlines of the global situation, it stands to reason that funds be specifically allocated for this industry. Roughly $140 billion will go toward healthcare, with $100 billion of that going directly to hospitals

Large Corporations

The government has set aside $500 billion to help large corporations. These entities will be able to apply for COVID-19 loans, loan guarantees, and other investments from the funds—which will have loan limits of 5 years or less and will not be forgiven. 

Unemployment Benefits

As so many people face job uncertainty right now, the stimulus package has extended unemployment benefits for 13 more weeks. The plan also increases payments by an additional $600 a week on top of individual state unemployment benefits—this provision is expected to last for up to 4 months. 

Small Businesses: The Backbone of America

Lendio is focused on changing the lending game for small businesses. That’s why the parts of the stimulus package geared toward this industry were of particular interest to us. 

According to the CARES Act, provisions include:

  • Forgiveness for small business loans taken out for keeping employees
  • Protections for small business contractors
  • Payroll tax deferment so companies can continue to pay their employees without paying the additional taxes
  • Debt relief as the Small Business Association is required to pay all existing loans for 6 months 

These programs will begin no later than 15 days from the signing of the act. 

Overall, $350 billion has been allocated to buoy small businesses during the coronavirus pandemic. However, these loans can take several weeks—or months—to be approved, which could lead to business shutdowns in the meantime. To combat this delay, the stimulus also includes $10 billion to be separated into $10,000 emergency grants for immediate relief.  

Jared Bernstein, Chief Economist to former Vice President Joe Biden, said of the stimulus package: “If you think of what we’re in as a hole in the ground, it doesn’t provide enough dirt to fill it up.” While the historic stimulus will certainly help individuals, corporations, and small businesses alike, the allocated funds are only a small fraction of what is ultimately needed for our economy to fully survive. 

Get the Funds Your Small Business Needs

The CARES Act stimulus package will help the American economy stay afloat during the coronavirus pandemic, but only to a point. Our country runs, and thrives, on the backs of small businesses and to a degree, the loans, payment and tax deferments, and loan forgiveness options will help. Don’t let COVID-19 bring your small business down—find what resources are available to learn more. 

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