On March 27, 2020, Congress passed the CARES Act infusing over $2T into the US economy in the form of direct cash payments to taxpayers, specific allocations to certain industries and over $300 billion dollars for businesses.
The SBA directly issued up to $10,000 grant/advances for businesses with less than 500 employees and with maximum loan amounts of $25,000 through the Economic Injury Disaster Loan (EIDL) program. This program was also offered to sole proprietors and independent contractors. By April 20, 2020, the SBA processed 755,476 applications and disbursed $3.3B in advances and loans. California small businesses accounted for nearly 15% of the applications and about 14% of the funds disbursed.
EIDL has a built-in grant program that, if certain conditions are met, up to $10,000 of the loan is forgiven, without any negative tax consequences for the business. The request for forgiveness can be made at the time of application or after the loan funds. The CARES Act included language that the EIDL loan advances would be deposited within three days of the application, but the reality is, the SBA has never processed this much volume and funding ended up taking significantly longer for most businesses.
On April 3, 2020, the Paycheck Protection Program (PPP) rolled out for banks and the SBA to provide up to $10M per business in funding to help keep businesses open during the COVID-19. The initial rollout was a disaster. Lenders were unprepared and lacked guidance on how to process applications.
The PPP allows businesses to request funds to cover 2.5x their monthly payroll. The loan is forgivable if the business uses at least 75% of the loan to pay payroll. Funds can also be used to pay mortgage interest and utilities.
By April 17th, the SBA reported it was out of money, leaving millions of small businesses in the dust while larger companies were provided special treatment from their lenders. In the first 13 days, the SBA processed 1,661,367 loans from 4,975 lenders. Over 100,000 California businesses shared in $33.4B in PPP funds.
On April 21, 2020, the Senate passed a bill approving an additional $480B of funding. The House is expected to pass the bill as well later this week. An additional $310B is allocated for the PPP program with $60B in special allocations to smaller credit unions and lenders. The EIDL program is being infused with an additional $60B in funds. This round of stimulus money is available for businesses who missed out on the first round of stimulus money.
What does this mean for your business? If you haven’t already taken advantage of the first round of stimulus (either PPP or EIDL), there will likely be funds available later this week or early next week. Business owners who only want to take advantage of the EIDL program can apply directly on the SBA’s website. Note that until the additional funding is allocated, the SBA is not accepting new EIDL applications.
Businesses that want to take advantage of the PPP must apply through a qualified lender. The best place to start is with your banker. So Cal Realty Law is working with our new and existing clients in applying for EIDL and PPP funds and connecting them to our trusted network of resources.
Our business was one of the many left out of the first round of funding and we’re hoping that the second round allows us to keep working for our clients and families during this time. Even if you’re unable to qualify for PPP or are unable to fund in the second round, there are other ways to help your business. One of the most valuable tools we’ve found is reaching out to our clients and just checking in on them. Give it a try.
If you have questions about how to take advantage of this stimulus package (or other ways to serve your clients), reach out to us at firstname.lastname@example.org or call 619-232-7325 to schedule a consultation.