The New Stimulus Package: What Does it Mean for My Business?
Because of COVID-19, the entire world is trying to find a way to navigate through this unprecedented and uncertain time. In addition to the country entering into possibly one of the biggest health crisis in history, Americans are also on the verge of facing a huge economical loss.
In order to minimize the damage that the economy might soon be facing, President Trump has recently signed a $2 trillion dollars stimulus package. This is the largest stimulus package that an U.S. President has ever signed and will hopefully give some much-needed financial assistance to the American citizens as well as American businesses. Keep reading to find out how your business could benefit from the new stimulus bill.
How is the stimulus Package being Used?
The $2 trillion dollar stimulus package that President Trump has signed is designed to help the millions of Americans that are out of work due to the novel coronavirus. The package also leaves billions of dollars for small to medium-sized business so that they can continue to pay their employees.
Here is how the stimulus money will be spent on businesses around the country:
- $350 billion for small businesses
- $500 billion for large industries
- $100 billion for hospitals and other health care facilities
The money is loaned out to businesses who do not have the funds to pay their employees during the COVID-19 pandemic. Small business can go to any participating bank or credit union to apply to receive up to $10 million.
Will There Be Interest Fees Attached to the Small Business Loans?
While you do have to go to a bank to get the money, the loan that you are getting as a result of the new stimulus bill is a little different from a “normal” small business loan. For example, when you are applying for the loan, you will not be required to provide collateral or prove that you are able to repay the loan in order to be accepted.
This specific type of loan is called an SBA Section 7(a) loan, otherwise known as a “Paycheck Protection Program.” With this loan, most of the loan is forgivable, meaning you don’t have to pay it back, as long as the money is used for:
- Mortgage payments that began before February 15, 2020
- Utility bills that were established before February 15, 2020
- Paying employees who make less than $100,000 per year.
All of the money that is received through the Paycheck Protection Program is considered to be forgiven for the first 8 weeks. However, if the money is used for anything other what is listed above, then the recipient will be responsible for paying back the loan at a 4% interest rate. Also, all of the money that is considered forgiven debt through the Paycheck Protection Plan will not be treated as a taxable income.
If you are required to repay part of the loan, your first payment will be due after six months, and the entire loan should be paid off after two years.
What Businesses are Eligible to Receive a Loan?
Any business that employees fewer than 500 people are eligible to receive the PPP loan, this includes non-profit organizations and tribal businesses as well. Also, people who are self-employed or independent contractors are also able to apply for the loan.
In order to get approved for the loan, your business needs to be under financial strain because of the pandemic. However, this doesn’t mean that you or any of your employees have to be diagnosed with COVID-19, causing your business to be temporarily shut down. According to the SBA fact sheet, you can receive a loan as long as “current economic uncertainty makes the loan necessary to support your ongoing operations.”
There are a few things that may disqualify your business from receiving a loan. For starters, if your business was not established before February 15, 2020, you will not be qualified to receive a PPP loan. Other disqualifying factors include your business currently being in bankruptcy, you are currently late or have defaulted on a previous SBA loan, or if someone who owns at least 20% of the company is currently facing criminal charges or has ever been convicted of a crime against a minor.
Do You Need to Provide Specific Information About Your Business?
When applying for the PPP loan, you will be asked to provide basic information about your company. Some of the information that you will need to know will include:
- How many employees you have on payroll
- Your business TIN number
- How much money your company spend a month on payroll
- Your utility and mortgage costs per month
- An itemized list of what you plan to use the money for
- A list of every person who owns at least 20% of the company
- Confirmation that the owner or co-owners have not been convicted of a crime.
The loan will help to cover the costs of payroll, rent, and utilities from February 15, 2020, through June 30, 2020. So, before you apply for the loan, it is a good idea to calculate exactly how much money you think your business will need to get by until the end of June.
When Can Small Businesses Expect to Recieve the Money?
A typical SBA loan can take anywhere from a few weeks to a few months before recipients receive their loans. However, this bill was specifically designed to help the lending process for small business go a lot faster. There are now more institutions that are qualified to make the loan and the rules are a little looser than normal SBA loans to help ensure that more businesses are able to get accepted. Many banks and lending institutions have created their own process to help the process move quickly. Some institutions will be able to review the application and have the loan ready in a matter of days. However, if a lot of businesses apply for loans around the same time, it could cause the bank’s new seedy process to slow down a little bit.
Trying to run your own business during such an uncertain time can seem overwhelming. But, luckily, there are resources and programs that are available to business owners in order to help them keep their companies afloat during such devastating time. If you have any questions or concerns about how COVID-19 and the new stimulus package could affect your business, please feel free to contact us today.