Small Business Owner’s Guide to COVID-19 Financial Aid

The pandemic is threatening big and small businesses alike.

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There is high pressure on small businesses to find ways to survive this situation.

While many businesses have been ordered to close their doors for the foreseeable future, others have already permanently shuttered because the losses have loomed too large. To mitigate the damage, the Federal government has extended financial aid loans and grants. 

There are also other methods for small businesses to source much needed funds during this time. For example, small businesses can turn to merchant cash advances for quick and easy financial aid. 

Here’s your overall guide to some popular COVID-19 financial aid options as a small business owner. 

Federal Aid Options

First things first, the Federal government and local governments are extending a lending hand. Let’s take a look at some of their programs and how they may help your business survive. 

Recently, the Federal government created the Coronavirus Aid, Relief and Economic Security (CARES) Act. Under this, the Paycheck Protection Program (PPP) was initiated with a $350 billion budget. On top of that, the PPP received an additional $310 billion in funding through the Paycheck Protection Program and Health Care Enhancement Act (PPPHCE). 

Under the PPP, a loan can be taken out for up to 2.5x the borrower’s average monthly payroll costs up to $10 million. The loan has a 1.00% fixed interest rate and repayment term of two years. This aid is currently intended to be in effect through June 30,2020. 

Billions on billions of funds are floating to small businesses, so how do you get your hands on it? 

 

We’re about to get to that!

All About the Paycheck Protection Program (PPP)

The Paycheck Protection Program offers government-backed interruption loans. Plus, these loans may be forgiven if a small business is able to sustain its employees on payroll. 

Let’s take a look at some of the benefits of the PPP:

  • Covering Operating Expenses: The loan is equivalent to 10 weeks of a company’s payroll up to $10 million. This money can be used flexibly to cover operating expenses like rent, utilities and payroll. The goal is to keep small businesses afloat, but you already knew that. 
  • Rehire Incentives: If you’ve already laid off some of your workforce, the program allows for you to rehire them and still reap the benefits of the loan. This is a win-win situation for everyone involved. 
  • Broadened Eligibility: The eligibility of the program covers: 501(c)(3) nonprofits with less than 500 employees, as well as businesses meeting the Small Business Association’s (SBA) small business criteria. It also is applicable to sole proprietors, self-employed persons and independent contractors. See more on eligibility below!
  • Loan Forgiveness: If a business is able to maintain their workforce, they are granted 8 weeks of loan forgiveness to cover utility, mortgage payments, rent and payroll. The loan forgiveness is adjusted and reduced relative to any layoffs or reductions in salary made during the loan period.

Is My Business Eligible for a PPP Loan?

Small businesses, stand up. You are eligible to receive a PPP loan if you’re a:

  • Small business (500 employees or less) 
  • A 501(c)(3) with less than 500 employees
  • A sole proprietor, independent contractor or self-employed
  • A Tribal business meeting SBA size standard
  • A 501(c)(19) Veterans Organization 

Additionally, if you can prove that your maximum tangible net worth is $15 million or less and the average net income for the past 2 fiscal years before your application submission is less than $5 million, you are eligible, too! Keep in mind that if your business is in the food services sector (NAICS 72), the 500 employee rule is applied per physical location.

What Will Lenders Be Considering?

OK, so it sounds easy enough to get this loan if you’ve matched the eligibility requirements above. Let’s see what lenders will be checking in order to approve your application: 

  • Because of the current economic situation, your business undoubtedly requires this loan to support ongoing operations 
  • You will use the loan to retain employees or fulfill mortgage, utility and lease payments
  • You don’t currently have an application pending for this same reason and amount
  • You have not received a duplicate loan amount from the government between February 15,200 and December 31, 2020


For those who are sole proprietors, self-employed or independent contractors, lenders will require documents like: 

  • Payroll tax filings
  • 1099-MISC 
  • Income and expenses (for sole proprietors) 

Economic Injury Disaster Loan and Grant (EIDL)

Small businesses can also apply for an Economic Injury Disaster Loan (EIDL). This is being provided to businesses who are experiencing a temporary loss of revenue at the hands of disaster (yes, we’re looking at you, COVID-19). The SBA allows borrowers to receive up to $2 million over 30 years at an interest rate of less than 4%. 

Additionally, the government has supplemented this loan with an EIDL grant of up to $10,000 (this one is a grant which means you don’t have to repay it)!

Common Challenges

We are in uncharted territory, and you’re not alone in facing such dramatic changes and challenges. 

It’s likely that you’re facing these types of hurdles and financial constraints:  

  • Access to capital: Consider a merchant cash advance which offers a quick alternative to receive cash in as little as 24 hours. 
  • Maintaining your workforce: From paying payroll to protecting their health, consider government loans, grants and alternative funding methods aimed to secure these needs. 
  • Sanitation costs: You’ll likely have to increase cleaning and maintenance contracts / pay for extra supplies. 
  • Changing market demand: Stay at home orders and higher unemployment rates have greatly shifted consumer demand. 
  • Insurance coverage:  Contact your insurance provider to see what may be covered in your interruption insurance. 
  • Inventory and supply chain management: This virus is affecting businesses globally so the supply chain may be delayed/ suppliers may have shut down.
  • Marketing:  Create a marketing plan to communicate with your customers on your policy and operational changes during this time. Try to retain as many customers as you can with promotions and incentives.

Small Business Best Practices During Coronavirus

As a small business owner, there’s a lot to manage, especially now. Along with the financial pressures, you need to also focus on protecting the health and wellness of your employees. 

 

Try to follow these best practices to further protect your business and its people:

  • Encourage sick workers to stay home
  • Postpone all non-essential travel 
  • Keep employees at least 6 feet away from one another 
  • Provide antibacterial, face masks and potentially gloves 
  • Clean consistently and routinely

Your Next Step: Apply Today

Despite the challenges caused by this pandemic, the ability to keep your business’ doors open is a possible feat. Whether you choose to lean government support or leverage private options, all you need to do is fill out applications and press submit! 

If you’re a small business that seems to qualify for the aforementioned government aid, find a lender. If you’d like to learn more about merchant cash advances and Uplyft Capital’s quick funding options, don’t hesitate to apply now!

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