Coronavirus Relief for Small Businesses and Nonprofits
American businesses are facing an unprecedented economic disruption due to the novel coronavirus
(COVID-19) outbreak, with reports of small businesses and nonprofits experiencing major
difficulties. Due to the nature of this economic disruption, the existing disaster recovery programs for
small businesses are insufficient. The CARES Act represents more than $376 billion in relief for
struggling small businesses and nonprofits, which falls into two main buckets: Access to Capital and
Small Business Support.
Access to Capital
- $349 billion for the Paycheck Protection Program to provide forgivable loans to small businesses
to pay employees and keep them on the payroll.
- These loans are open to most businesses under 500 employees, non-profits, the self-
employed, startups, and cooperatives.
- $17 billion for debt relief for current and new SBA borrowers. SBA will pay the principal,
interest and fees for the next 6-months on SBA-backed loans.
- Today, that would help 320,000 small businesses and any new borrowers in the 7(a) or
- $10 billion in immediate disaster grants. Using the current economic injury disaster loan (EIDL)
program, SBA can provide up to $10,000 to applicants within 3 days of applicants self-certifying
they are eligible. Applicants will not be required to repay the advance payment, even if they
are eventually denied for the loan.
Small Business Support
- Requires SBA to provide additional language resources to ensure small business owners can access the resources they need as easily as possible.
- $265 million in funding for resource partners, including Small Business Development Centers and Women’s Business Centers (WBC) to provide training and counseling to businesses impacted by Coronavirus.
- A waiver of the WBC matching requirement to alleviate the need to fundraise during the emergency.
- $10 million for Minority Business Development Agency grants to train and counsel minority-owned firms impacted by Coronavirus.
- $675 million to provide SBA with the resources it needs to staff up and administer these new and enhanced programs.
- Finally, this will increase the number of small businesses that qualify for streamlined bankruptcy process, by nearly tripling the debt cap to $7.5 million to help American small businesses that will need to reorganized due to the COVID-19 pandemic.
Paycheck Protection Program
The bill establishes a new guaranteed loan program at SBA for small businesses to cover payroll during the immediate crisis. The Paycheck Protection Program will:
- Support $349 billion in 100 percent guaranteed, low interest, no fee loans of up to $10 million with repayment deferred for at least six months; and
- The amount of the loan forgiven at the end of the covered period will be determined by how many employees were retained on the company’s payroll. Up to 100% of the loan may be forgiven if the borrower has retained the same number of employees as when they received the loan.
- There are safeguards built in to protect against employers gaming the program, and well as recognizing some employers will be forced to do temporary furloughs but bring their employees back on.
- The program allows forgiveness for additional wages paid to tipped workers.
- Forgiven amounts will not be considered income for tax purposes.
- Any amounts not forgiven will be covered in the ongoing loan for a term of 10 years, not to exceed 4% interest with the 100% guarantee.
Who is eligible?
Small and Medium sized businesses up to 500 employees, non-profits, independent contractors and the self-employed. This includes churches but only to cover payroll costs of an associated business, like a thrift store.
What about franchises and hotels?
The program temporarily waives SBA “affiliation rules” to allow businesses with multiple locations the normally are not considered small, to qualify. This is especially important for our restaurant and lodging sector. They are still limited to the same maximum loan size - $10 million - as a business with one location.
How are loans made?
The SBA’s network of 2,500 7(a) lenders will be used to process these loans. There is also authority to fast track additional lenders to process and disburse these loans to reach as many small businesses as quickly as possible.
Are these grants?
Yes and No. The amount of the loan forgiven at the end of the year will be determined by how many employees were retained on the company’s payroll, up to 100 percent for full retention. There are safeguards built in to protect against employers gaming the program, as well as recognizing some employers will be forced to do temporary furloughs but bring their employees back on.
What is covered?
This bill allows firms to get a loan to cover up to 8 weeks of payroll and any new EIDL loan balances incurred because of Coronavirus but cannot exceed $10 million.
How long does the program last?
The program is open until June 30, 2020, as it is intended for immediate payroll relief to ensure businesses do not do mass layoffs during this crisis.
Emergency Economic Injury Grants
The bill creates a new $10 billion grant program, leveraging SBA’s Office of Disaster Assistance infrastructure, to provide small businesses with quick, much needed capital.
Small businesses, cooperative, ESOPS, private non-profits, independent contractors and the self-employed are eligible to receive up to $10,000 to cover immediate payroll, mortgage, rent, and other operating expenses while they wait for additional relief to be processed.
Who is eligible?
Independent contractors, the self-employed, private non-profits, and small businesses and medium sized businesses with up to 500 employees, including startups, cooperatives, and ESOPs.
What is a private non-profit?
Private non-profits include churches and private universities.
Churches are eligible?
Yes, but limited to business activities. The SBA will make the final determination which activities, like running a thrift shop, are eligible for a grant.
How quickly will grants be made?
The legislation requires SBA to disburse the $10,000 grants within 3 days of verifying the business’s eligibility.
Are grant recipients eligible for other SBA programs?
Yes, businesses remain eligible for the paycheck protection program, disaster loans, and regular SBA-back loans.
6-months of Principal and Interest Relief
Small businesses in industries heavily impacted by coronavirus—such as travel, tourism, and hospitality—are experiencing dramatic cash flow problems. The government is ultimately responsible for guarantees on these loans and has a vested interest in averting mass defaults.
To provide immediate relief to small businesses with SBA-backed loans, the bill:
- Provides small businesses with relief from SBA loan payments, including principal, interest, and fees, for six months;
- Encourages banks to provide further relief to small business borrowers by enabling them to extend the duration of current loans beyond existing limits; and
- Provides $17 billion in relief to SBA borrowers.
Who is covered?
Current and new 7(a) and 504 borrowers, under current SBA eligibility requirements. Those include small businesses, sole proprietors, cooperatives, and ESOPs.
Is eligibility expanded for this program?
No, this uses current, long-standing eligibility criteria.
How does it work?
The SBA will pay a borrower’s principal and interest for the next 6 months on an SBA-backed loan.
Employee Retention Tax Credit
The CARES Act provide a refundable payroll tax credit for 50 percent of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers who have experienced a greater than 50 percent reduction in quarterly receipts, measured on a year-over-year basis.
Wages of employees who are furloughed or face reduced hours as a result of their employers’ closure or economic hardship are eligible for the credit. For employers with 100 or fewer full-time employees, all employee wages are eligible, regardless of whether an employee is furloughed. The credit is provided for wages and compensation, including health benefits, and is provided for the first $10,000 in wages and compensation paid by the employer to an eligible employee. Wages do not include those taken into account for purposes of the payroll credits for required paid sick leave or required paid family leave, nor for wages taken into account for the employer credit for paid family and medical leave.
The credit is provided through December 31, 2020.
Paid Sick Days and Paid Family and Medical Leave Tax Credits
The Families First Coronavirus Response Act provides a refundable tax credit equal to 100 percent of qualified paid sick days and family and medical leave wages paid by an employer. The tax credit is allowed against the tax imposed by the employer portion of Social Security taxes. If the credit exceeds those taxes, it is refundable.
Paid Sick Days: Employers with fewer than 500 employees and government employers must provide employees with 2 weeks of paid sick leave, paid at the employee’s regular rate, to quarantine or seek a diagnosis or preventive care; or paid at two-thirds the employee’s regular rate to care for a family member or a child whose school has closed, or child care provider is unavailable, due to the coronavirus. Full-time employees are entitled to 2 weeks and part-time employees are entitled to the typical number of hours that they work in a typical two-week period. Employees who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan are provided with leave. This expires December 31.
For employees who must self-isolate, obtain a diagnosis, or comply with a self-isolation recommendation, the amount of qualified sick leave wages for each employee is capped at $511 per day. For amounts paid to employees caring for a family member or for a child whose school or place of care has been closed, the amount of qualified sick leave wages for each employee is capped at $200 per day.
Paid Family and Medical Leave: Employers with fewer than 500 employees and government employers, for employees who have been on the job for at least 30 days, must provide up to 12 weeks of job-protected leave under the Family and Medical Leave Act to quarantine, care for a child, or an at-risk family member. After the first two weeks of paid sick leave, employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay. The amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. Employees who work under a multiemployer collective agreement and whose employers pay into a multiemployer plan are provided with leave.
SBA resource partners, including Small Business Development Centers (SBDCs), Women’s Business Centers (WBCs), provide vital mentorship, guidance and expertise to small businesses. These organizations will need to hire more staff to deal with the increasing number of small businesses that need their help to respond to COVID-19.
- The bill provides $265 million in additional funding.
State Trade Expansion Program (STEP) Support
The State Trade Expansion Program (STEP) provides matching funds to states and territories to provide opportunities for small businesses to participate in trade missions, international marketing efforts, workshops, export trade show exhibits, and other promotional activities.
- Reimburses States for financial losses resulting from the cancellation of foreign trade missions or trade show exhibition due to COVID-19;
- Allows states to use unspent funds from FY 2018 and FY 2019 to cover losses due to COVID-19 outbreak through FY 2021.
Women’s Business Center Matching Waiver
The bill waives the requirement that WBC’s meet their 1:1 private match to SBA provided funding. This will help alleviate the need to fundraise during the Coronavirus crisis and allow them to continue receiving federal funding to help small businesses.
Minority Business Development Agency
The bill provides $10 million for the Minority Business Development Agency grants to train and counsel minority-owned firms impacted by Coronavirus.
Increasing Access to SBA Through Multiple Language Support
Immigrant-owned small businesses are an essential part of our economy. In 2018, more than 3.1 million immigrants launched small businesses, employing more than 8 million people, generating more than $1.3 trillion in sales, and paying more than $4 billion in taxes.
The bill authorizes $25 million for small business resource material and services in the ten most commonly spoken languages.
Why is this needed?
Millions of impacted small business owners do not speak English as a first language but are eligible for SBA’s lending and ED program. It is vital they can get the support they are entitled to as easily as possible though language support at SBA.
Small Business Bankruptcy Enhancement
The bill will increase the number of small businesses that qualify for streamlined processes in the Bankruptcy Code created last year via the Small Business Reorganization Act. As enacted, a small business could not have more than $2.7 million in debt. Under this bill, that number will increase to $7.5 million to help American small businesses that will need to reorganized due to the COVID-19 pandemic.
Increasing SBA Staffing to Meet Demand
To execute these new programs swiftly, the SBA will need to hire more staff. This bill provides $675 million for SBA to hire employees to meet increased demand from small businesses impacted by COVID-19.
There are also several local resources available currently to assist small businesses:
The San Mateo County Board of Supervisors approved an initial $3 million in Measure K funds to launch the San Mateo County Strong Fund, which:
- Helps individuals and families most in need to cover basic household expenses.
- Helps small local businesses avoid layoffs, pay rent, and support self-employed residents who don’t qualify for State Unemployment benefits.
- Helps non-profit agencies with operating expenses.
- Allows individual donors to contribute to the fund through PayPal. 100 percent of the funds raised will stay in San Mateo County.
The San Mateo County Economic Development Association (SAMCEDA) is regularly updating its page with resources for businesses and workers: https://www.samceda.org/COVID-19-Resource-Links.
Specifically, SAMCEDA has a number of links that help explain how the new PPP expands the SBA's 7(a) loan program to help small businesses cover their near-term operating expenses and retain employees, including the application form and tips for filling out forms and applying for loans:
- Paycheck Protection Program (PPP) - Overview
- Paycheck Protection Program Application for Borrowers
- Paycheck Protection Program (PPP) Information Sheet: Lenders
- Paycheck Protection Program (PPP) Information Sheet: Borrowers
The San Mateo Credit Union has special financing options for its members affected by COVID-19 including:
- Work Reduction Loans
- Skip payment for qualified auto and personal loans
- Early redemption on Certificate of Deposit (CD) prior to the maturity without penalty
The California Capital Access Loan Program (CalCAP) has announced supplemental contributions for borrowers whose businesses and properties are located in a Severely Affected Community (SAC) – at this time California statewide is considered a SAC. For more information click here: https://www.treasurer.ca.gov/cpcfa/calcap/sb/index.asp
- The California Small Business Finance Center is offering two types of loans for small businesses:
- The Disaster Relief Loan Guarantee Program includes:
- Small Businesses located in CA with up to 750 employees
- Eligible non-profits
- Loans up to $20 million
- Guaranteed up to 7 years; term can be longer
- The Jump Start Loan Program includes:
- Businesses located in a declared disaster area may qualify
- Loan amounts range from $500 to $10,000
- Term up to 5-years, fully amortized
- Check if you qualify here: https://www.ibank.ca.gov/small-business-finance-center/.
- The Disaster Relief Loan Guarantee Program includes:
The San Francisco Office of Economic and Workforce Development is regularly updating its website with resources for businesses and workers. The city is offering:
- Deferment of business taxes and business licensing fees.
- Small Business Resiliency Fund.
- Leasing and Legal Assistance.
- Revolving Loan Fund – access to capital, including microloans and technical assistance.
- Business Loan Fund – loans ranging from $50,000 to $250,000 to qualifying commercial projects.
- Paid Sick Leave – up to 40 hours of additional paid sick leave time to employees beyond existing policies through the Workers and Families First Program.
- Find more information here: https://oewd.org/assistance-guidance-businesses-and-workers-impacted-covid-19.
United Way Bay Area has a COVID-19 Community Relief Fund
Learn more here: https://uwba.org/covid19fund/.
Small Businesses and Nonprofit FAQs:
On April 2, 2020, I held a tele town hall with small business and nonprofit leaders to help answer their questions about how to apply for financial assistance during the coronavirus outbreak and shelter at home order. I was joined by the U.S. Small Business Administration Disitrict Director for San Francisco Julie Clowes. Below is a list of the most commonly asked questions and answers from that event or click here to watch the tele town hall.
Q: Is it OK to apply for both EIDL and PPP simultaneously?
A: Starting April 3, the rule states people may only apply for one program.
Q: Is the $10,000 a grant no matter if you qualify for a loan or not and does not need to be paid back?
A: Officially it is a forgivable loan of up to $10,000. It does not need to be paid back.
Q: Can residential landlords qualify for EIDL or PPP if they are losing income to pay mortgages due to tenants unable to pay rent?
A: PPP is for payroll expenses and mortgage interest or rent/utilities for the business itself, not necessarily the investment properties. Under EIDL, the landlord/(business side) may qualify.
Q: Is the PPL for only full-time employees or can it cover part time employees?
A: PPP looks at overall payroll costs so if the part-time people are employees then it should count. 1099's are not considered employees for this program as 1099 independent contractors also qualify themselves to apply for PPP.
Q: How is the EIDL loan amount determined?
A: It's meant to cover financial needs so they look at revenue and cost of goods sold last year to find net and create a factor from there.
Q: As a sole proprietor, one person business, I have lost about 90% of my business - is there anything I can apply for if I still have 10% of my income.
A: You may qualify under either program. Encouraged to look at your specific financial needs to determine which program may be more beneficial to you.
Q: Does "payroll costs" include health benefits when calculating the average monthly payroll for the max loan amount?
Q: Under the PPP, for the loan to be forgiven, does the business have to rehire all employees that were laid off?
A: It appears the applicant business will need to rehire the FTE equivalent back but we are waiting for additional guidance on the forgiveness requirements.
Q: As an independent contractor can you apply for both, EIDL for operating expenses, and UI for salary?
A: Maybe. We would want to make sure you are not duplicating benefits.
Q: Will banks charge a fee to process our applications?
A: They shouldn’t. Please let SBA know if they try to do so.
Q: Do you have to have an account with the lender bank to apply for PPP loan?
A: This is not a requirement for PPP although I am hearing that this is how some banks are choosing to manage the program per their internal policy.