Covid-19 Financial Help for Businesses: The CARES Act, PPP and EIDL Programs

COVID-19 Financial Help for Businesses: The CARES Act, PPP and EIDL Programs

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This is a really difficult time for business owners. Let’s face it, I’m sure few of us had really given much thought to global pandemics in our business contingency plans. Whilst the CARES Act has been put in place to help workers and their families through these difficult times, it has thankfully put some measures in place to provide financial help for businesses, too.

This has not been straightforward, however. Support for businesses under the CARES Act included bolstering the Paycheck Protection Program (PPP) and expanding the Economic Injury Disaster Loan Program (EIDL) to provide financial assistance in the form of loans to businesses to cover costs and help them survive the pandemic.

But the program was initially overwhelmed with applications – there was a cap on the total amount of money that the government was going to put into this package of loans. This cap was reached extremely quickly and applications were halted.

Applications for PPP Have Now Resumed

It was decided that more funds would be made available for businesses under the CARES Act, and on Monday 27th April applications for the Paycheck Protection Program recommenced after the $484 billion bill was passed. Extra funds were also allocated for the EIDL program.

Financial Help for Businesses: The Paycheck Protection Program (PPP)

To help businesses keep their employees on the payroll, the PPP is available to any business that meets the Small Business Association’s (SBA) size requirements – a maximum of 500 employees or another industry-specific maximum as well as self-employed people. The PPP loans offered are up to a maximum of $10 million, or 2.5 times the average monthly payroll costs.

The loan will be wholly forgiven if all employees are kept on the payroll for at least eight weeks and at least 75% of the amount is used for payroll. The loan can also be spent on mortgage interest of business properties, rent and utilities.

To apply, you’ll need to contact your lender – as long as they are an SBA-approved bank – and check your eligibility. The interest rate is set at 1%, the maturity of the loan is two years, and no personal guarantees or collateral is required.

Financial Help for Businesses: The Economic Industry Disaster Loan Program (EIDL)

The EIDL program has existed for a while now – it was set up by the SBA to provide assistance loans to help businesses survive through disasters like wildfires and storms.

The EIDL was expanded temporarily to meet the needs of businesses throughout the Covid-19 pandemic and to allow more businesses to apply. It included an advance of $10,000 which was treated more like a grant as it was not expected to be repaid, and would be provided whilst the outcome of the loan application was being decided.

Financial assistance through the EIDL program is available to businesses with fewer than 500 employees, nonprofit organisations, sole proprietors and independent contractors and loans will be offered up to a maximum of $2 million. Besides the initial advance, the loan will be repayable after a 12-month deferral with different interest rates for profit and non-profit organizations.

However, the recent bill passed by the House was expected to add funds to the program, so keep checking the SBA’s website to see when applications will be resumed.

Apply Now

If you want to apply for either the PPP or EIDL assistance, don’t delay. There’s been speculation that this second round of funding will run out as quickly as the first round did. Consult your lender now, and consider using a checklist to see what documentation you might need to prepare for your application.

Other Options

Express Bridge Loan Program

The Small Business Administration (SBA) has expanded its loan options to help out small businesses who have been catastrophically impacted by COVID-19. Applications for the Express Bridge Loan payments of up to $25,000 are going to be allowed until March 13, 2021 and the maximum loan term is seven years – although there is some flexibility. The business must have been operational on 13 March 2020 and fit the industry-specific definitions of a small business.

You can apply for an Express Bridge Loan at your SBA District Office – find it here.

SBA Debt Relief

During the COVID-19 pandemic, the SBA is providing debt relief as a type of financial help for businesses – principal, interest and fees of current and new loans are essentially being taken care of for the next six months.

As well as this, any SBA Disaster Loans are being automatically deferred until the end of 2020. Interest will still accrue on these loans but no payments will be due. If you need more information about SBA Debt Relief, you can contact one of the Disaster Loan Servicing Centers.

Stay On Top of the Latest Relief Information

As a business owner, it’s crucially important to stay on top of this as it gives your business the best chance of surviving through this pandemic. These funds ran out quickly before, and they might do so again.

If you need any assistance navigating the system, contact us and we will see what we can do to help. Otherwise, contact your lender as soon as you can to get the share of the financial help for businesses that you’re entitled to.

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Tanya Nichols, CFP®, CDFA
Tanya Nichols is a fee-based CERTIFIED FINANCIAL PLANNER™ professional and Certified Divorce Financial Analyst located in Duluth, MN and serving clients across the country. Align Financial takes a simple but deeply impactful approach to wealth management, connecting your money to your life in a way that feels right to you.

Because Align Financial is independent of Raymond James, the expressed written opinions above are our own and not necessarily reflective of Raymond James’ opinions. Read our full disclosure here.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® in the U.S.