This time of great adversity has impacted us all in one way or another. With serious shifts to our way of life and business-as-usual alike, small businesses and startups – the people we exist to serve – have been hit especially hard. Many businesses are no longer able to conduct business due to restrictions enacted for the safety of the general public and are now faced with financial difficulty due to declines in revenue & the struggle of maintaining their talented workforces.
To better assist our startups through this time, CEO Rick Stockburger sat down with Jon Thomas Consulting to talk about two major opportunities available to small businesses across the country and how these opportunities can help them weather the blows to their businesses caused by COVID-19.
The specialists at Jon Thomas Consulting informed us of two loan programs created by the Small Business Administration through the federal aid appropriations. These are the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP). Below, we break down some details of each, including important information you should know before you apply for the funding.
• Intended to assist businesses faced with difficulties caused by disasters – such as the COVID-19 outbreak and the resulting economic environment
• Open to any type of small business including nonprofit 501(c)3’s and 501(c)6’s
• Some sensitive personal information will be necessary during the application process
• You will need to know your approximate – but as accurate as possible – gross revenue and cost of goods sold from 2/01/2019 to 1/31/2020
• Cost of goods sold is considered to be $0 for nonprofits
• Provide the number of employees you have, including independent contractors and other atypical personnel
• You can’t have any felonies
• You must check the box for $10k cash advance to receive grant funding
• Approval may be awarded in as little as 7 days
• The loan is payable over 30 years with payments beginning in six months to a year
• Ability to get credit elsewhere is not necessary but it may affect the total amount your business is able to borrow
• The EIDL is similar to a traditional loan with a large deferral
• Designed to enable businesses to continue to pay staff through June 30
• Eligible for the amount of 2.5 times the total monthly average payroll costs, based on average monthly costs in 2019
• Good for contractors, subcontractors and any job you could traditionally hire a person to do
• Covers up to $100k per employee
• Includes employee earnings, taxes, health insurance, sick leave, medical leave, cash tips and the employer share of 401k programs
• 75% of loan funds must go towards payroll but can be used for other things
• Funds come from a bank which is liable for issuing the loan, therefore the issuing bank can impose additional restrictions
• You should always check with bankers whom you have a previously established business relationship
• Applicants should gather most recent business tax returns, their 941 form and 1099 form, as well as a profit and loss statement
• If you own other businesses, you must disclose your ownership interests
• If a private equity firm owns more than 20% of your company, you must disclose their number of employees in your own count – which could exclude you from qualifying as a small business
• For PPP loan to be forgiven you must maintain your employee headcount; you may lay off personnel but it will reduce the forgivable amount of the loan
While our article is meant to provide helpful information to small businesses in this time of need, we are not financial advisors. We recommend you consult the experienced professionals at Jon Thomas Consulting, your financial institution and representatives from the Small Business Administration.