The pandemic is dragging on, and small businesses around the nation are reeling. One study revealed that about 800 American small businesses are shutting down every day. This figure is truly shocking and underscores the need for federal action. Fortunately, a new round of help is on the way.
“After months of delays and partisan bickering, Congress passed a second stimulus bill, which has now been signed by President Trump,” reports Lendio’s CEO and cofounder Brock Blake in a recent Forbes article. “A significant part of this second stimulus includes renewed funds for Paycheck Protection Program (PPP) loans. For small business owners, their families, and their employees, help is finally on the way […] Last spring, one of the most significant issues with the PPP rollout was a biased distribution that enabled many lenders to prioritize large corporations and businesses with well-connected interests—all at the expense of struggling small business owners. Fast, fair, and hassle-free access to instantly usable funds is critical to fulfilling the government’s stated intention of the new bill and reviving the American economy.”
Indeed, this $900 billion pandemic relief package presents a multitude of benefits for our nation’s small businesses. Let’s look at a few of the most impactful.
As referenced in the quote above, the federal stimulus includes a second round of PPP loans. In total, $285 billion has been set aside for these crucial loans. Even if you already received a PPP loan last year, you may still qualify again if you meet certain criteria. First and foremost, you need to prove that your revenue has dropped at least 25% this year.
In order to make it easier for small businesses to get the support they need, Congress enhanced the reimbursement for loans under $50,000. This helps remedy the issue that arose last year when some lenders neglected to help smaller businesses due to the lower opportunity for profit. Now, underserved businesses will get their day in the sun.
The money from a PPP loan is intended to cover your payroll for 2.5 months. And the great news is that it’s forgivable if you follow the SBA’s directives. For example, at least 60% of the loan needs to go toward your payroll. And the remaining funds must also be used for only approved purposes.
If you’re interested in seeking a PPP loan for your small business, you can access our streamlined application here. You should also feel free to reach out to our financing experts if you have any questions about the application process.
Millions of Americans already have received, or will soon receive, economic impact payments up to $600. There has been debate over whether these checks make a difference for businesses, as some recipients might just use the money to cover bills or add to their savings.
But research indicates that these payments can add up to a big impact for businesses on the local and national level.
“In households that spent their stimulus checks, respondents reported using the money for a variety of expenses, and many reported spending it on more than one thing: About 80% of these respondents reported using it on food, and 77.9% on rent, mortgage and/or utilities, including gas, electricity, cable, internet, and cellphone,” explains a report from the United States Census Bureau. “More than half (58.2%) of such respondents reported spending stimulus payments on household supplies and personal care products. About a fifth (20.5%) reported spending the money on clothing. A smaller share (8.1%) said they spent or would spend the stimulus on household goods like TVs, electronics, furniture, and appliances or on recreational goods like fitness equipment, toys, and games.”
With this wide array of spending taking place around the country, your business will likely see a benefit from the stimulus checks. And you may also see a similar uptick in sales as a result of the federal unemployment insurance supplements included in the stimulus package. This program provides an extra $300 a week to workers who have lost their jobs.
Economic Injury Disaster Loans
If your business has suffered from the pandemic, you might qualify for an SBA Economic Injury Disaster Loan (EIDL). This special type of financing is set aside to help businesses recover from catastrophes and get back into a position to thrive.
“SBA can provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred,” states the section of SBA.gov dedicated to these loans. “The loan amount will be based on your actual economic injury and your company’s financial needs, regardless of whether the business suffered any property damage. A business may qualify for both an EIDL and a physical disaster loan.”
If you have incurred losses, you may well qualify for one of these borrower-friendly loans. The interest rate is 3.75% for businesses and 2.75% for nonprofits, with no penalties or fees for pre-payment. The money is intended for use as working capital or to facilitate your normal operations.
Before applying, you should review the requirements and make sure your business qualifies. For example, you typically can’t have more than 500 employees. You can reference the SBA’s size standards here.
Don’t Let this Pandemic Relief Pass You By
Yes, there are lots of exciting elements in this new stimulus package. But nobody is going to knock on your door, explain which benefits you qualify for, and then fill out the applications for you. Now is the time to do your research and identify your prime opportunities.
Before applying for any type of loan or financial benefits, carefully read through the requirements. Applying for things when you don’t meet the qualifications is a waste of everybody’s time. And the same can be said for submitting incomplete or inaccurate applications for relevant loans. By taking the time to do things right, you’ll be rewarded with crucial funds and the chance to empower your business for the future.