March 2020 was one for the books, and as they also say, it’s only up from here (hopefully).
As the nation continues to reel over the ongoing spread of the novel coronavirus, we have discovered this disease to be as virulent to the reaches of the economy as it is to our individual health and wellbeing. As we have embraced social distancing and other precautionary behaviors as the new norm for our daily lives, we are starting to experience the effects of these necessary precautions on the simple transactions that we may sometimes take for granted, like enjoying a meal at a restaurant. These mitigating behaviors have effectively pulled the emergency brake on the economy. Such an abrupt event cannot occur without lasting disruption, so we should expect the effects to last. Now is the time to move past the panic, survey available resources, make a plan, and act.
Perhaps the most challenging aspect of the coronavirus conundrum is the virus’s rapid and asymptomatic transmission. In an aggressive effort to combat this aggressive threat, governments and businesses have had no choice but to implement precautionary measures, which, by the hour tighten the vice on our economy’s ability to function normally. These are big changes in an immediate way. Likewise, that we are in the midst of a frightening situation is old news. As you look to reestablish order out of the chaos, start by taking a measure of comfort in knowing that (1) no one was ready for this and (2) you can be best prepared by acting now.
Fortunately, resources are available now with the aim of keeping your business operational, your employees paid, and the economy running as closely to normal as possible during this challenging time. Below you will find the details of several immediately available financial resources including the Small Business Administration’s Economic Injury Disaster Loan program, North Carolina COVID-19 Rapid Recovery Loan program, and the Paycheck Protection Program (under the CARES Act). The most immediate course of action you can take is to apply for these resources now. The specific objective of these offerings is to provide small businesses with operating capital as a holdover during this volatile time.
This money is for restaurants that may not be able to survive on a take-out only operation, for fitness centers that may have had to close down altogether due to health concerns, for small retailers with no online presence, and for otherwise “essential” businesses who, despite still being operational, are experiencing a drastic reduction in revenues.
These resources are available now, but they are limited. Claim them now for your business, your employees and for the stability of the larger economy.
SBA Economic Injury Disaster Loans (EIDL)
The SBA’s EIDL program is a loan program for small businesses (less than 500 employees, with some exceptions) and non-profits that have experienced decreases in revenue as a result of the COVID-19 crisis to borrow cash to fund operational costs. EIDL funds may cover operational costs such as payroll, inventory purchases and maintenance, and other fixed business costs.
Businesses may borrow up to $2 million, with the amount capped at 6 months of the borrower’s operating costs. Applicants will not designate a loan amount on their application, rather, the SBA will designate a loan amount for the applicant based on the information provided. Interest rates are expected to be around 3.75% for businesses and 2.75% for non-profits. Loan terms can range between 15 and 30 years, depending on ability to pay.
Other benefits of the EIDL program include:
- $10,000 advance for qualifying applicants upon submission of loan application (no repayment obligation as long as the advance is applied toward qualifying expenditures)
- No collateral for loans $25,000 or less
- No personal guarantee for loans $200,000 or less
- Deferred payments for 1 year (though interest will accrue)
- No application fees or prepayment penalties
Note: Now that applications are available for financing through the CARES Act Paycheck Protection Program, EIDL loans will likely need to be refinanced through the Paycheck Protection Program. Although PPP applications are available as of today, guidance is still being issued regarding administration of the PPP loan program, while the EIDL program is already underway and offering a $10,000 non-repayable advance for qualifying expenses.
Paycheck Protection Program (PPP)
The CARES Act, which was signed into law on March 27, 2020, provides nearly $2 trillion in COVID-19 relief funds through various programs. One of those programs is the Paycheck Protection Program to which $350 billion has been allocated to offer forgivable loans to qualifying small businesses. Like EIDL, PPP is administered through the Small Business Administration, and is available to businesses with 500 employees or fewer (with some exceptions). Loan amounts are capped at the lesser of $10 million or 2.5 times the business’s average monthly payroll expense. These loans are eligible for forgiveness to the extent that the borrowed funds are used for qualifying expenses incurred during the 8-week period after the loan is originated.
Given the forgiveness component of the PPP loans and the anticipation that these loans will be largely forgiven, the maturity date of PPP loans is 2 years, with interest accruing at a rate of 0.5%. Loan payments are deferred for 6 months from origination.
The application period for PPP loan opened today (April 3, 2020), and is expected to continue through June 2020, or until funding is fully allocated. Applications are submitted through participating SBA lenders (retail banks), so contact your bank to apply.
NC Rapid Recovery Loans
Collaboration among a number of small business interests has resulted in the North Carolina COVID-19 Rapid Recovery Loan program. This is a program with limited funding of $15 million, which funds are available and applications are live. As this program is now underway, you are encouraged to apply without delay.
As with the PPP and EIDL programs, this loan program is aimed at small businesses and bridging shortfalls in revenue to cover operating costs. This loan is available to fund up to two months of a business’s revenue up to a maximum of $50,000.
Apply for an NC Rapid Recovery loan here, now.
With financial resources now available to address immediate and anticipated revenue shortfalls due to coronavirus disruption, The Vernon Law Firm encourages you to seize the opportunity presented by these resources and to plan around them to ensure the wellbeing of your business and employees.
The Vernon Law Firm is here to help. A speedy recovery for those individuals and businesses already affected by the COVID-19 crisis and preparedness for the challenges ahead is of paramount importance to the Vernon Law Firm.
We invite you to contact us at 336.227.8851 if you have questions or wish to discuss, at no charge, any of the above resources or other available resources as your business navigates the times.