For the last couple of weeks, we’ve been sharing information about digital marketing tactics during crises situations, like coronavirus. It’s especially important to take great care to ensure your small-business marketing content is appropriate for these uncertain times, when emotions are running high.
Digital marketing is incredibly important to maintaining your share in the marketplace and recovering more quickly after a crisis, but we can imagine you’ve been thinking far more about whether your business has the finances to withstand the duration of the coronavirus shutdowns and the ongoing repercussions of it.
We hope you’ve begun to see a path through this metaphorical economic maze, despite the understandable anxiety and fear you’ve been feeling recently. And while iFocus Marketing can provide you with resources and assistance with your digital marketing plans, we are not experts at, say, employment law or accounting.
However, we think we’re pretty great at researching topics and distilling information into digestible content, which is exactly what we’re doing in today’s blog post. We’ve researched the newly-passed stimulus legislation, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to help you understand two ways your business can get the cash you need to stay afloat and ready to come back after this crisis passes. With this information, we hope you’ll feel empowered to take action with the time we’ve saved you from reading all 800 pages of the legislation!
Before we dive into the two parts of the legislation, there are three important things you should understand.
- Once you determine which programs you qualify for (maybe both!), you should apply immediately. If approved, you are not obligated to take the loan, and you don’t have to pay fees. You have nothing to lose.
- Know what your working capital needs are. This is an important number for your assistance applications.
- Yes, you can apply for both programs, as long as you use the proceeds from them to cover different expenses–no double-dipping. This also applies to any regional or local government assistance you might receive. Each type of funding must cover different costs.
Paycheck Protection Program
This is a newly created CARES Act program in which the federal Small Business Administration (SBA) backs loans through local lenders. They currently work with 1,800 lending institutions and plan to expand their relationships due to high demand. The CARES Act allots $350 billion for paycheck protection loans.
Loans are given up to a maximum of $10 million, or 2.5 times the average monthly payroll costs, whichever is less, as well as expenses for paid sick leave, health care, and other benefits during the one-year period before you take out the loan.
The Paycheck Protection Program loans come with a maximum interest rate of 4%, with a ten-year loan term. You do not need a personal guarantee or collateral to get this loan, and you can defer payments for up to six months.
- You must certify that your business is a small business based on SBA standards.
- You must have been in operation before February 15, 2020.
- You must employ fewer than 500 workers, or be a select kind of business with fewer than 1,500 workers.
- You may be a 501(c)(3) nonprofit with fewer than 500 employees or a certain 501(c)(19) veteran organization.
- Self-employed people, sole proprietors, freelance, and gig economy workers also can apply.
Part of the loan is eligible for forgiveness and doesn’t count toward your business’s income, if you spend it on operating expenses, and if you maintain the same average number of employees as you did from February 15, 2019 to June 30, 2020, or from January 1, 2020 to February 15, 2020, during the first eight weeks after you receive the loan. You do not face a reduction in forgiveness if you rehire employees you previously laid off from February 15 to April 26, 2020, or if you restore any decreases in wages or salaries by June 30, 2020.
If you don’t meet these criteria, the amount eligible for forgiveness is reduced. You also face additional reductions if you cut compensation for employees who make less than $100,000 per year by more than 25% as compared to the most recent quarter. The U.S. Chamber of Commerce has a helpful calculation about this.
Loans are forgiven when you use them to cover any of these costs:
- Payroll costs, excluding prorated amounts for employees making more than $100,000 per year, plus group health insurance premiums and other healthcare-related costs.
- Rent on a lease in force before February 15, 2020.
- Certain utilities, transportation, telephone, and internet access expenses for services beginning before February 15, 2020.
To apply for a Paycheck Protection Program loan, speak with your local lender.
Economic Injury Disaster Loans
Because President Trump declared the coronavirus pandemic a disaster, businesses can now apply for a Small Business Administration Economic Injury Disaster Loan (EIDL). This program has always been available in the event of a disaster, but the CARES Act allots $10 billion for coronavirus-related loans for small businesses established on or before January 31, 2020.
The new legislation also extends loan access to sole proprietors and independent contractors, tribal businesses, cooperatives, and employee stock ownerships with fewer than 500 employees. All nonprofits organizations, including 501(c)(6)s also qualify.
Small businesses can take out up to $2 million in an EIDL. Each loan is on a 30-year term, with 3.75% interest for small businesses and 2.75% interest for non-profit organizations. The first month’s payment is deferred for a full year from the date you sign the promissory note.
Borrowers also can receive $10,000 in an emergency grant cash advance that can be forgiven if you spend it on paid leave, to maintain payroll, to cover increased costs due to supply chain disruption, to pay for mortgage or lease payments, or to repay obligations you cannot meet due to loss of revenue because of the coronavirus pandemic. Even if you don’t qualify for any additional funds, you can get this grant money.
EIDLs for coronavirus pandemic recovery are approved based on the applicant’s credit score, not the ability to repay, nor on the business’s prior year’s tax return. Prior bankruptcies also don’t affect your ability to take out an EIDL.
If you apply for an EIDL for less than $200,000, the government can approve it without a personal guarantee or real estate as collateral. However, it will take a general security interest in your business property.
Apply for an EIDL or $10,000 grant directly through the Small Business Administration website. Make sure you select “Economic Injury for the Coronavirus,” rather than physical damage due to another disaster, on your application.
At iFocus Marketing, we stand behind the cliche that “This too shall pass,” and we’re confident we’ll see you on the other side. Our digital marketing experts are ready to help you any way we can with your digital marketing needs. Give us a call at 913-708-8567 to talk about what we can do for you, or if you just need a good set of listening ears. Feel free to give us a shout online as well. We’re here for you.