Federal Grants For Small Businesses To Pay Employees During COVID: Here's What To Know

LAKE OF THE OZARKS, Mo. — The federal government is offering small businesses thousands of dollars in the form of grants, to help them cope with the fallout from the COVID-19 crisis, through programs created by the CARES Act (Coronavirus Aid, Relief, and Economic Security Act).

Businesses have been affected by the pandemic and ensuing national shutdown in varying ways, but many have seen decreased revenues, even to the point where they have been forced to lay off huge amounts of employees.

They should rehire those employees, soon, the Small Business Administration says, and they can get those employees' salaries/wages covered under multiple programs available to businesses that employee less than 500 people (and certain businesses that employe more than 500). Here's a look at two of the main programs available to small business owners across the country, and links to apply.

Paycheck Protection Program

The Paycheck Protection Program was created under the CARES Act, and provides small businesses a grant, which does not need to be repaid, if used for specific purposes. Those expenses include payroll costs, interest on mortgages, rent, and utilities. However, the SBA says at least 75% of the forgiven amount must have been used for payroll.

Applicants must go through a local lender. Download the application form here: https://www.sba.gov/document/sba-form--paycheck-protection-program-borrower-application-form

From the SBA’s website:

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.

Lenders may begin processing loan applications as soon as April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020.

This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. (There are some exceptions for businesses with more than 500 employees.)

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

This loan has a maturity of 2 years and an interest rate of 1%.

If you wish to begin preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender.

Economic Injury Disaster Loan Emergency Advance

EIDLs existed before Coronavirus, as loans to help businesses get through disasters. But the Coronavirus Aid, Relief, and Economic Security (CARES) Act expanded the provisions and loosened some requirements. Businesses can still apply for substantial loans, but they can also receive up to $10,000 in emergency grant money that does not have to be repaid, if used for specific expenses, which fall in the parameters of the expenses to be covered under the loan: fixed debts, payroll, and other expenses that could have been paid for had the emergency not occurred. The grant money will be available in less than a week, according to the SBA.

Consult your financial institution for more details.

Click here to apply for the EIDL Loan: https://covid19relief.sba.gov/#/

From SBA’s website:

In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid.

The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.