LIMA — As the economic fallout related to the coronavirus outbreak damages many businesses’ bottom lines, the federal government has offered a number of programs meant to keep employers up and running and their employees paid.
Unsurprisingly, many of these federal programs come with some complications, but if businesses and their employees are hoping to survive the economic challenges brought by the viral pandemic unscathed, such government programs — and the over $2 trillion dedicated to them — are worth exploring.
Here is a quick guide for small businesses considering federal options to keep their employees on board.
Q: What bills passed by the federal government are relevant to small businesses?
Over the month of March, Congress passed three large bills related to the coronavirus. The latest — the Coronavirus Aid, Relief and Economic Security (CARES) Act — however, has received the most attention due to Congress’s $2 trillion allocation toward the bill’s programs.
While the massive CARES Act has grabbed the most headlines, the first two bills may still be relevant to some small businesses as they deal with small business economic injury disaster loans, paid sick leave and unemployment insurance assistance.
Either way, the dollar figures associated with these programs, as well as the speed Congress has moved to past them, shows how much the federal government is relying on unprecedented economic investments to ensure that businesses and individuals have some income during these trying times.
Q: How can a small business benefit?
Basically, if a small business is having trouble paying its employees, the federal government has a pot of $350 billion through the paycheck protection program to help out. Reductions in required qualifications have also loosened who can apply for such funds.
Under the new rules, businesses with under 500 employees can qualify for the program. This includes independent contractors, sole proprietors, self-employed, franchisees, as well as 501c3 nonprofits.
Larger companies in the restaurant and hotel industry also have the option to apply for paycheck protection funds if each location they own has less than 500 employees at a location.
The second stipulation is that a business has to have existed (and paid taxes on employees) since Feb. 15.
The other requirements typically required for small business administration loans have been waived.
Q: Should a small business sign up?
There’s little reason not to sign up. Under terms of the new program, if the funds, up to $10 million per business, are used correctly, the loan becomes a grant that can be used on payroll, utilities and rent expenses.
Borrowers are not required to offer collateral. Loan payments can be deferred for at least six months and up to one year, and there is no prepayment penalty. Interest rates are capped at 4%.
To encourage a smooth rollout, the Small Business Administration will also be leaning on commercial lenders to offer the new loans, meaning that qualification shouldn’t require jumping through more hoops than necessary.
Business groups, like the U.S. Chamber of Commerce, are expecting quick turnaround — a week or two — on fund availability due to the change.
Q: How does a small business make sure the loan is forgiven?
Don’t lay off employees or reduce wages by too much.
Funds received can be used over an eight-week period (anytime between Feb. 15 and June 30) to cover payroll costs, payments on interest, rent and utilities. Borrowers are also being asked to certify that the loan is being used to support the aforementioned items.
The amount forgiven may be reduced in proportion by the number of full-time employees laid off, or if compensation of employees is reduced by more than a quarter.
Q: How does a small business apply for such a loan?
Meet with your commercial lender.
Lenders in the local area that can offer such loans include: Ottoville Bank Co., Superior Credit Union, Citizens National Bank of Bluffton, First National Bank, Fort Jennings State Bank, Liberty National Bank, Mercer Savings Bank and the Union Bank Co.
Additional lenders are expected to be approved down the line by the Department of Treasury.
A full list of Ohio’s approved buyers can also be found at limaohio.com.
Local business groups are also asking that small business owners contact them if they have additional questions. More in-depth questions about individual cases can be answered by calling the Small Business Development Center at Rhodes State College, 419-995-8184, or the Lima/Allen County Chamber of Commerce, 419-222-6045.
Q: The paycheck protection program doesn’t work for my small business. Are there other options?
Yes. Through an earlier coronavirus bill, the Small Business Administration has also kickstarted the economic injury disaster loan program. Under the new law, businesses can apply for working capital loans — up to $2 million — to get through the coronavirus outbreak.
The 30-year loans, with 3.75% interest, may work better for some applicants, but many business experts expect the turnaround on loan approval to be slower than the paycheck protection program.
Those applying for EIDLs, however, may qualify for a forgivable $10,000 emergency grant if they feel that they are eligible for the larger economic injury loan. Such a grant can be accessed within three days after the SBA receives a business’s loan application for the new program.
Again, those looking for more information on how to traverse such federal programs are encouraged to contact SBDC Project Coordinator Kathy Keller at Rhodes State College, 419-995-8184.
In the meantime, a number of business resources explaining some of the available federal programs in more detail can be found at limaohio.com.
Reach Josh Ellerbrock at 567-242-0398.