NJ Small Businesses Find Hope in the CARES Act

Cash is king. You may have prepared a three-to-six-month buffer, but you still need a contingency plan for when that runs out. There was little to no way for you to prepare for these unprecedented times and there are still bills to pay.

Take full advantage of the CARES Act.

The Small Business Administration’s (SBA) Economic Injury Disaster Loans (EIDLs) have always been available in the event of a disaster. On Friday, March 27^th, Congress passed the Corona Virus Aid, Relief, and Economic Security Act (CARES). The $2 trillion package is going to provide $10 billion for EIDLs, as well as $350 billion in Paycheck Protection Loans for small businesses.

This is the first time in our nation’s history that a virus or pandemic event has been declared a disaster. If you are a small business owner, EIDLs are the first line of support. You probably do not have the time to look over the three stimulus bills already passed, let alone the most recent one, which was 800 pages. Here is how you can take full advantage of the CARES Act and get cash as soon possible.

What terms are offered in EIDLs?

Loans are offered up to $2 million. You have 30 years to pay it back. The interest rate for small businesses is 3.75%

What are the expanded provisions?

The SBA will approve EIDLs based on your credit score, not repayment ability. No tax return is required. Prior bankruptcy will not disqualify you.

Loans for less than $200,000 can be approved without a personal guarantee. Real estate will not be required as collateral. There will however be a general security interest in business property.

Tell me about the Emergency Grant Cash Advance.

Loss of revenue means not being able to spend on such things as paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments and repaying debts. The emergency grant cash advance of $10,000 is offered to borrowers and forgiven if spent on any of the above costs. This applies to sole proprietors or independent contractors, as well as tribal businesses, cooperatives, and ESOPs with fewer than 500 employees and all non-profits.

There are 30 million small businesses in the United States. Current unemployment numbers are at 3.3 million. In a busy year, the SBA processes 800,000 applications. The demand for this relief cannot be overstated.

Apply as soon as you can for Economic Injury for the Coronavirus directly through the SBA at www.sba.gov/disaster. No fees are required. You must have been in business by January 31, 2020 to qualify. For more information, go to www.sba.gov/coronavirus.

What about Paycheck Protection Loans?

Another source of help is the CARES Act’s Paycheck Protection Program Loan Guarantee. The SBA is backing small-business loans through local lenders. They currently work with 1800 lenders, but anticipate the need for more.

Small businesses with fewer than 500 employees are eligible, as are select types of business with fewer than 1,500 employees. Certain non-profits and veteran organizations can apply as well. If you are self-employed, a sole proprietor, or a freelance worker, you are eligible if you were in operation before February 15, 2020.

More details regarding the Paycheck Protection Program include:

• Loans are given up to a maximum of the lesser of $10 million, or 2.5 times the average monthly payroll costs, during the one-year period before the date on which the loan was made.
• Maximum interest rate is 4%
• The term is up to ten years.
• No personal guarantee or collateral is required.
• Payments are deferred up to six to 12 months.

Spend any amount on operating expenses in the first eight weeks and part of it may be forgiven and not counted as income. Loans will be forgiven when used for payroll costs, except for prorated amounts for individuals who are paid more than $100,000. This also applies to rent pursuant to a lease in force before February 15^th, as well as electricity, gas, water, transportation, telephone or internet access. Group health insurance premiums and other healthcare costs are included as well.

Apply for this loan directly through your local lending institution. Business owners must personally certify that their company qualifies as a small business.