The Future of Small-Business Relief

It may come too late to save thousands of small businesses, but the congressional response to the economic shutdown from COVID-19 will be a sore relief to those that can keep their heads above water until the assistance shows up.

While much attention has been centered on aid for individual workers displaced by efforts to control spread of the virus, the $2 trillion package includes roughly $350 billion in direct aid for small businesses. That would come in the form of forgivable loans to owners who keep paying their employees during the crisis.

Details of the assistance were spelled out in a section of the congressinonal bill that runs roughly 85 pages. Finance executives assessing the measure say that the amount of assistance for qualifying companies will vary depending on whether or not they have reduced their staffs already, and by what percentages. 

Those who have retained all of their workers will be eligible for 100 percent loan forgiveness; those whose partial staff reductions are attributed to COVID-19 would have only a portion of their loans forgiven. And those who have completely shut down operations, such as hotels, would have to repay any loans in full if they have laid off their entire staffs.

At the moment, the loans of up to $10 million would be issued through banks and credit unions, but some advocates in Congress are calling for non-banking institutions to be allowed to participate, as well. 

Among the other provisions are:

Emergency grants of up to $10,000: The Small Business Administration will accept applications for  economic-injury disaster grants in that amount, money that will not have to be repaid.  Paid out to companies within three days of an application, it can go toward payroll, paid sick leave and debt obligations. Owners who take these grants would have their loan-forgiveness eligibility reduced by a similar amount.

Existing SBA payment suspension: If you already ahve an SBA loan, you will not be required to pay interest or principal on it for six months. The SBA woul receive $17 billion from the relief package to cover those missed payments.

Payroll tax credit: Companies whose receipts have fallen by at least half this quarter, compared to the same period in 2019, may be eligible for a payroll tax credit of up to $10,000 per employee, as long as they are still paying their employees wages and/or health benefits. The catch: If you claim this credit, you won’t be eligible for the loan-forgiveness program.