The COVID-19 outbreak has been battering the U.S. economy, forcing millions of Americans into unemployment already. And without relief, small businesses really stand to suffer. Many have already had to close their doors, and the longer the crisis drags on, the greater the risk of them never getting to reopen.
Thankfully, there is some relief in sight. In late March, a $2 trillion economic stimulus package was put into place. As part of that package, individuals whose earnings fall below a certain threshold are eligible for a one-time $1,200 payment, and unemployment benefits have been expanded to include boosts in weekly payments, extended weeks of benefits, and eligibility for freelancers and gig workers who would normally be excluded from filing.
There's relief on the horizon for small businesses, too. In fact, roughly $350 billion of the aforementioned package is earmarked for small business loans. But these aren't just any loans -- they're loans that could potentially be 100% forgivable. If you own a small business, here are a few things you need to know about the new loan program.
IMAGE SOURCE: GETTY IMAGES.
1. You can apply if you have 500 employees or fewer
This includes restaurant and hotel chains with under 500 employees per location, non-profits, and faith-based organizations with employees on their payroll.
2. You can apply up until June 30
Though you have some time to apply, loans are being dished out on a first-come, first-served basis, so the sooner you get moving, the greater your chances of getting some money.
3. Your loan may be completely forgiven if you focus your funds on payroll
If you use the money you receive to pay employees and cover necessary operating expenses over the next couple of months, you may be eligible to have your loan forgiven. Specifically, you'll need to spend 75% of the money you get on payroll costs. But to be clear, you can't cut your workers' salaries just to keep them on your payroll -- if you do, you'll reduce the percentage of your loan eligible for forgiveness.
4. You won't be liable for taxes on your forgiven loan
Debt forgiveness generally comes at a cost -- it can increase your tax liability. But due to the dire circumstances leading to the COVID-19 relief package, any forgiven debt that arises from it won't be considered taxable.
5. You can use your loan to rehire employees
If you've already had to let some of your workers go due to a lack of funds, you can use your loan money, once it comes to through, to bring back staff members. You'll be eligible for loan forgiveness provided you rehire your employees by June 30.
6. You can qualify for 2 and 1/2 months' worth of payroll
To arrive at that figure, you'll need to calculate your average monthly payroll costs from 2019. If you're a new business and weren't up and running in 2019, you can take your average payroll costs from January and February of this year.
7. You can apply for a loan through your primary bank
If there's a bank you already work with, your best bet may be to apply for a loan through it directly. The Small Business Administration also has a list of approved lenders up on its website, but keep in mind that some banks are limiting the number of applications they can accept right now.
Times are tough for a lot of small businesses, but if you own one, you can take some comfort in the fact that relief is out there. It also pays to talk to your vendors, landlord, service providers, and anyone else you owe money to other than your staff and ask for more flexible payment terms. At a time when everyone is struggling, you may be pleasantly surprised to find yourself on the receiving end of flexibility.
