Aid for a Small Business Hit by Virus Crisis
The economic consequences of the coronavirus pandemic are hitting small businesses, especially hard as customers practice social distancing, states enact forced closures, and events get cancelled. More than 99% of all American businesses are small businesses, and they employ more than half of the workforce.
Hillyer Riche is an Accountant in Caulfield providing taxation accounting and business advisory services.
According to U.S. government research, natural disasters cause 40% of small businesses to fail, while one in four small businesses will close within a year of the event. In addition to the immediate public health crisis, economists expect the COVID-19 pandemic to kick off a painful recession that could further impact the survival of small businesses. The Internal Revenue Service is deferring the tax filing payment deadline for many filers until July 15.
Small businesses across the country are teetering on the edge of collapse because of the novel coronavirus, and Facebook is stepping in to help.
The social network will spend $100 million on grants to support over 30,000 small businesses in 30 countries, Facebook COO Sheryl Sandberg announced Tuesday. The funds will be paid out in a combination of cash and advertising credits for companies that need help covering operational expenses and in paying rent or their employees, Business Insider's Dominic Reuter reported.
Restaurants, coffee shops, gyms, fitness studios, and cultural institutions across the United States have closed as authorities urge Americans to practice social distancing to slow the spread of the novel coronavirus that has already killed more than 20,000 people across the globe. Some cities forced the closures, while others shuttered voluntarily as customers embraced social distancing in an attempt to slow the virus' spread.
"We've heard loud and clear that financial support could enable them to keep the lights on and pay people who can't come to work," Sandberg wrote on Facebook Tuesday. "Whatever happens next, we will be working to help businesses weather this storm."
Small businesses have been hit hard by mandatory closures and safety measures required to slow the spread of the coronavirus (COVID-19).
But businesses have a growing number of resources and relief programs to turn to, including many new provisions including the stimulus package enacted by Congress. The FDIC is also encouraging banks to work with customers to provide coronavirus-related assistance, related to both personal and business finances.
Below is a list of federal, state and lender-specific support to pursue, which will be updated to include programs as they're released and refined. Return to this page regularly. The coronavirus pandemic's impact on the fashion, beauty and retail industries is staggering, as major retailers have shuttered their doors, halted production and even furloughed most of their employees in response to the virus.
While major companies are experiencing setbacks, small businesses across the country and the globe are feeling the brunt of the losses with many independent fashion labels ceasing operations, streamlining their collections and making other changes in anticipation for an uncertain future post-COVID-19.
Several major companies and cities across the country have responded to the challenges facing small businesses amid the pandemic by creating grants to keep them afloat, including the likes of Facebook, Google and the Council of Fashion Designers of America.
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Coronavirus small business loans
To help combat the financial fallout from the coronavirus, the government is offering particular loans for small business owners. The U.S. Small Business Administration (SBA) has created a relief plan to help small businesses affected by coronavirus through affordable loan options. The disaster assistance loans for small companies will offer interest rates of 3.75% for small companies without credit available elsewhere, and interest rates of 2.75% for non-profits. The SBA provides long-term repayment options on these loans of up to 30 years. Businesses with a credit available elsewhere are not eligible for these loans.
They can be if they're used to retain or hire workers. Starting Friday, the Small Business Administration is guaranteeing $349 billion in potentially forgivable loans under the rescue package. A business with up to 500 employees, including owners who work solo and freelancers, can borrow up to $10 million to be repaid over two years at an annual rate of 0.5%. The money that's used to pay salaries can be forgiven, and a portion of the funds used for rent, mortgage interest and utilities can be at least partially forgiven. Payments are deferred for six months.
You technically could get the full amount of the loan forgiven. But if you cut jobs — say you had ten employees, let them go, and hired back only five — the amount of loan forgiveness will be reduced, and you'll have to repay some. But a caveat from the government: Because so many owners are expected to take advantage of the loans, it's anticipated that no more than 25% of the forgiven amount may be for things other than payroll — rent, mortgage interest and utilities. So there's a good chance you will have some repayments ahead.
The U.S. Small Business Administration (SBA) has increased its funding pool from $20 billion to $50 billion in response to the virus.
It is currently offering low-interest disaster loans of up to $2 million for small businesses suffering losses due to the coronavirus. These loans, per the SBA, can be used to pay debts and cover payroll and other bills. You can apply online or by mail once the governor of your state submits a declaration of emergency. You can also reach out directly to your local Small Business Development Center (SBDC) and your SBA district office.
Private loans and grants
Some lenders and companies are offering discounted businesses loans and grants during the coronavirus outbreak. Finder.com has been keeping track of offers from U.S. Bank, Amazon, Facebook and others.
Kabbage also has an online hub to help businesses; the Restaurant Workers' Community Foundation set up a relief fund to help workers and owners. Additionally, check with your business's bank about your options. Citi, for example, announced that it would waive monthly service fees and remote deposit capture, as well as penalties for early CD withdrawal.
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COVID-19 Small Business Resiliency Fund
San Francisco has created the COVID-19 Small Business Resiliency Fund for businesses impacted by the pandemic. The fund grants up to $10,000 to companies to pay their employees and rent.
To be eligible for the fund, businesses must have between one and five employees and show a loss of revenue of 25 per cent because of the pandemic. Businesses must also have gross receipts less than $2.5 million and participate in activities regulated by the city.
Businesses can apply for the fund on San Francisco's Office of Economic and Workforce Development website.
Amazon has created a $5 million Neighborhood Small Business Relief Fund to offer cash grants to small businesses with fewer than 50 employees or less than $7 million in annual revenue in the Seattle area, including in the South Lake Union, Bellevue and Regrade neighbourhoods.
Facebook chief operations officer Sheryl Sandberg announced on March 17 that the company is creating a $100 million grant program for small businesses experiencing financial hardships because of the COVID-19 pandemic.
The grants will go to about 30,000 businesses across the 30 countries where Facebook has employees. Part of the grants will be "ad credits" that businesses can use to advertise on the social media platform.
Facebook has announced that it will give $40 million in grants to 10,000 U.S. small businesses that have been negatively affected by a coronavirus. The companies span 34 cities, but those in New York and Seattle will be the first to receive funds next week. This is part of the $100 million grant program announced on March 17. The majority of the grants will be distributed in cash, with some ad credits for business services. Businesses do not need to be on Facebook, Instagram or WhatsApp to apply.
There are over 30 million small businesses in the U.S., and according to a recent Goldman Sachs survey of over 1,500 small businesses, 96% say COVID-19 has already impacted them.
"The COVID-19 pandemic has hit small businesses everywhere," wrote Facebook COO Sheryl Sandberg in a post published Thursday evening. "Suddenly and, through no fault of their own, many simply can't do business, and for others, it has become much, much harder because customers are doing the right thing and staying at home."
Google is offering $800 million in grants to support small and medium-sized businesses affected by the COVID-19 pandemic.
Of the $800 million, $340 million will be given in ad grants to these businesses with active accounts. The ad grants can be used until the end of the year across the company's advertising platforms. A $200 million grant will also be given to financial institutions and non-profit organizations that help provide small businesses with capital.
The company is also offering $250 million in ad grants to the World Health Organization and over 100 government agencies worldwide that are providing information to stop the spread of COVID-19.
Employee Retention Credit
If you had to suspend business because of a government authority order or your gross receipts are less than 50% of what they were the same quarter last year – and if you decide against getting a PPP loan – you may be eligible for the Employee Retention Credit. This credit amounts to 50 per cent of the qualified wages (including qualified health plan expenses) you paid in a calendar quarter, up to $10,000 per employee for all calendar quarters. (So the maximum credit amount is $5,000 per employee for all calendar quarters.) The covered period is March 12, 2020, to the end of the year. Generally, if you take the credit, you can apply it against your portion of Social Security taxes that you pay. If there is an overpayment, it can be used for other tax liability – or in anticipation of receiving the credit, and you can access withheld taxes that are required to be deposited with the IRS. Again, you cannot claim the Employee Retention Credit if you get a PPP loan. But you can receive tax credits for qualified paid leave under the Families First Coronavirus Response Act and the Employee Retention Credit if they are for different wages.
Paycheck Protection Program (PPP)
The $2 trillion coronavirus stimulus package includes $349 billion in small business loans and $500 billion in loans for distressed corporations.
These small business loans — known as the Paycheck Protection Program (PPP) — will be run through the same infrastructure as existing 7(a) loans from the Small Business Administration (SBA). Loans can be for up to two and a half times a company's monthly payroll costs incurred during the year before the date the investment is made. Loans are for up to 10 million dollars and are guaranteed at 100% by the SBA. The program was created to help small businesses affected by coronavirus to maintain their workforce. So up to eight weeks of payroll, mortgage interest, rent and utilities covered by a PPP loan will be forgiven, as long as the full-time headcount and payroll stay the same as they were on average between February 15, 2019, and June 30, 2019 (or January 1, 2020, to February 15, 2020, if you launched your business just this year). Companies that have already let employees go or cut salaries have until June 30, 2020, to rehire or reinstate salaries.
The part of the loan that does not become a grant (you'll have to request forgiveness once you can certify that you used the money to cover payroll, etc.) will be due in two years, though payments are deferred for six months. The interest rate is fixed at 0.50%. (If you don't maintain headcount and payroll at pre-pandemic levels, the amount that is forgiven will be reduced.)
To be eligible, a business generally must have 500 or fewer employees. Sole proprietors and independent contractors may also apply. You can submit an application for one of these loans through a local lender. The only other paperwork you need is payroll documentation. Lenders may begin processing applications from small business owners and sole proprietors Friday, April 3, 2020, and from independent contractors and self-employed individuals the following week, April 10, 2020. The deadline is June 30, 2020, but you should apply quickly since Congress has capped the program at $349 billion. For more details, including a list of participating lenders, once it's available, go to the SBA website. The Treasury Department also has a helpful fact sheet.
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Contact the people you rely on
Tronco-DePierro also recommends immediately getting in touch with your bank, vendors and anyone else you rely on or work with regularly.
"Be straightforward and be honest," she says. "On Monday, I made a list of basically every vendor we have, made notes on everyone we have to get in touch with and made calls or sent emails to them all."
She also recommends connecting with any small business communities you're a part of, or look for local organizations or alliances to join now so that you can all share resources and advice. Networking with other business owners online can also be helpful.
While different communities have different types of resources for different types of small businesses, Tronco-DePierro says she got a lot of help from the New York City Hospitality Alliance. "It was easier to follow them and their updates than it was to follow the New York Times and the governor's website."
Most importantly, treat your employees and community members well.
"I am cautiously optimistic that we will be able to reopen," says Tronco-DePierro. And when she does, she plans to rehire her entire team.
Until then, she wants to be a voice for the small business community and work with other owners to get through the next few months. "We're going to have to come together as a society," she says.