The Small Business Owner's Survival Guide to COVID-19 Funding Assistance Programs
Article was written by: Charles Lew
For small business owners, the misinformation, disinformation and poorly disseminated information in general, has created a climate that has all but crippled us. We are left scrambling in a purely reactive manner, in multiple directions out of fear that we may miss one of these illusive ‘assistance programs’.
With that being said, and in an attempt to assist each and every one of us who is as confused as we are, we have compiled an outline that I pray will assist you during these confounding times. Whether you’ve had to severely cut back on your operating hours or close your doors altogether, there are assistance options to help ease the burden caused by COVID-19.
In addition to the traditional SBA funding options, the CARES Act has set up new temporary programs that are outlined below from a bird's eye view. For more detailed information, please visit the U.S. Small Business Administration website here. On April 2, Governor Gavin Newsom announced California’s assistance programs for small businesses as well, which are also detailed below. For more information visit here.
SBA Assistance
Paycheck Protection Program (PPP) Available for select banks
WHAT IS IT?
■ SBA loan created to help keep workers on payroll.
■ SBA will forgive loans if all employees are kept on payroll for 8 weeks and the money is put toward rent, payroll, utilities, or mortgage interest.
Note that at least 75% of the forgiven amount must go toward payroll.
Forgiveness based on employer maintaining or quickly rehiring employees and maintaining salaries. If either salaries or full-time employment decreases, forgiveness decreases as well.
■ No collateral or personal guarantees required and no federal or lender fees will be charged.
■ Maximum loan amount is determined by past year’s payroll up to $10 million
■ The loan has a maturity of 2 years at a 1% interest rate. Loan payments are deferred for 6 months.
WHO CAN APPLY?
■ Small businesses with less than 500 employees with some exceptions (see the SBA site linked above for details)
HOW?
■ Apply through existing SBA 7(a) lenders or other regulated lenders if approved and enrolled in the program OR
■ Apply through a federally insured depository institution, federally insured credit union, or participating Farm Credit System institution
■ Begin by downloading a sample form to see what information will be needed from you here. Applications open April 3, 2020.
Economic Injury Disaster Loan (EIDL) Advance
WHAT IS IT?
■ EIDL advance of up to $10,000 for small businesses seeing a loss of revenue due to COVID-19.
■ Funds are made available within 3 days after an application is successfully processed.
■ The loan advance does not need to be repaid.
WHO CAN APPLY?
■ Small businesses with less than 500 employees with some exceptions. See here.
HOW?
■ Start the application process here.
WHAT IS IT?
■ Access to up to $25,000 for small businesses that have an urgent need for cash.
■ Can be a term loan or a bridge while applying for the SBA Economic Injury Disaster Loan.
■ They will be repaid fully or partially from the EIDL loan.
WHO CAN APPLY?
■ Small businesses that currently have a relationship with SBA Express Lenders.
HOW?
■ See more information on applying here.
○ For current 7(a) loans, the SBA will cover the principal, interest, and fees for six months.
○ For new 7(a) loans issued before September 27, 2020, the SBA will cover the principal, interest, and fees.
California Programs
CA IBank Small Business Loan Guarantee Program
WHAT IS IT?
■ A $50 million allocation to the IBank Small Business Loan Guarantee Program to mitigate the barrier for small businesses that do not meet the federal fund qualifications.
■ Program provides loan guarantees and direct loans.
■ Interest rates are negotiated between the lender and borrower and qualifications are based on criteria created by the lenders.
■ Guaranteed for up to 7 years but terms can be flexible.
■ Guarantees up to 85%-95% of the loan.
WHO CAN APPLY?
■ CA small businesses with 1-750 employees and eligible non-profits.
HOW?
■ Apply directly with a lender (approved lender list is pending) or contact a participating Financial Development Corporation. More information accessible here.
■ Contact IBank through this email: IBank@IBank.ca.gov
CA Capital Access Program (CalCAP)
WHAT IS IT?
■ Loan loss reserve program providing up to 100% coverage on losses from loan defaults.
■ Maximum loan amount is $5 million and maximum enrolled amount is $2.5 million.
■ Individuals have a maximum loan amount of $2.5 million over a three year period.
■ Lenders and borrowers individually contribute between 2% and 3.5% of the total loan amount to the CalCAP loan loss reserve account.
WHO CAN APPLY?
■ Small businesses with less than 500 employees.
■ Primary business and at least 51% of the employees or its income, sales or payroll comes from business taking place in California. See more details here.
HOW?
■ Obtain assistance through participating lenders based on lenders’ own criteria.
For additional advice on federal assistance programs, SBA is offering free business counseling which can be found here. For California businesses looking to determine which loan best suits their needs, there are a number of support sources available here.
Contact with a specialist in GO-Biz’s Office of the Small Business Advocate is also available here. Aside from both the state and federal efforts to support small businesses, owners and employers would also be advised to check back in regularly as we are in the process of securing multiple speakers and guests over the course of the next four (4) weeks with topics ranging from lease and real estate considerations to Wage & Hour considerations, and business interruption insurance coverage during the COVID-19 crisis.
** Share this link with a family/friend who is a small business owner and can find this information helpful. **
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