Businesses with fewer than 500 employees are scrambling to understand the new federal programs aimed at helping them remain solvent and viable amid the pandemic.
The coronavirus economic stimulus bill or CARES Act that was signed into law late last week contains $2 trillion in payments to taxpayers, hospitals and small business programs to battle the public health crisis and shore up the economy.
“This is a unique crisis in that there are federal responses,” said U.S. Sen. Christopher Murphy, D-Conn. “No way can you counterattack a health crisis when there is nothing that can save us on the economic side.”
Murphy addressed about 500 business community members on a conference call this week hosted by the Quinnipiac and Greater New Haven chambers of Commerce.
“Hopefully this is a once-in-a-lifetime moment for us in Connecticut,” he said. “In many ways, it will scratch us where we itch.”
The state Department of Economic and Community Development had already implemented a $75,000 bridge loan program for small businesses with 100 employees or fewer. The loan carries zero interest for 12 months.
The CARES Act goes further and provides up to $1,200 payments to single taxpayers and $2,400 to married couples plus $500 per child. The payments are available to those earning up to $75,000 for individuals and $150,000 for married couples.
It also provides for “supersized” unemployment benefits, with $250 billion set aside for extended insurance and an additional $600 per week for four months in addition to state programs, Murphy said.The deal applies to the self-employed, independent contractors and gig economy workers.
The Paycheck Protection Program sets aside $350 billion to prevent layoffs and business closures while workers have to stay home during the outbreak. Companies and non-profits with 500 employees or fewer that maintain their payroll can receive up to eight weeks of assistance. If employers maintain payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven.
The PPP will be administered through the Small Business Administration and implemented by banks around the country that are already approved as SBA lenders. The money will be distributed on a first come, first serve basis. Businesses are encouraged to act quickly because an estimated four million businesses are thought to be eligible.
“It’s a work in progress, it’s in the throes of implementation,” said Joe Ercolano of the Small Business Development Center in New Haven. “Not all the details are out yet. Keep an eye out for updates.”
The Economic Injury Disaster Loan, which has been around for a couple of weeks, provides a quick infusion of cash to struggling businesses and now includes a $10,000 emergency grant. It has been made more efficient and streamlined and based on credit score. But businesses should not assume they won’t be approved because of weak credit, Ercolano said. There will be leniency.
There is also assistance for those with Small Business Development loans.
Other benefits to businesses include changes in net operating losses. The 80% rule is lifted, and losses can now be carried back five years. Additionally, the excess loss limitation rules for pass-through entities are suspended..
Business owners have reported difficulties with interruptions on the SBA’s old website and applicants should be sure to check the status of their loans for incomplete applications.
“The new website is opened,” said Joe Williams of the Small Business Development Center. “There were a lot of problems with the old ones. Hopefully the new website will solve a lot of those problems. Encourage you to come to our website, we’ll help you through the process. Tell us how has this really hindered your business.”
Local business advocacy groups such as the Midstate Chamber of Commerce have resources available to help business owners determine which loan product they are eligible for.
In Meriden, the city’s local Economic Development Department has reached out to small businesses to help them seek SBA loan renewals and introduce them to new products that can help them.
City staff has received calls “from all different types of business throughout the city,” said Economic Development Director Joseph Feest. “We have offered to help walk owners through the process of applying for the different programs that our currently available through the state and federal government.”
Feest said many small restaurant owners are more reluctant to take on loans that have to be repaid as compared to grant programs that can be forgiven under conditions.
Business advocates suggest owners reach out to their accountants, lenders, lawyers, representatives from the SBA or groups such as SCORE, a non-profit network that provides mentoring and education to startup and existing businesses, the Women’s Business Development Council, the Small Business Development Center, and others for help choosing a program that suits their needs.