We are now three weeks out from the passage of the CARES Act, which was intended to provide relief to small businesses and individuals affected by the COVID-related shutdowns. As the dust settles, this newsletter provides a status update on the various programs created by the CARES Act and the Families First Coronavirus Relief Act (“FFCRA”).
Payroll Protection Program (“PPP”) Loans
PPP loans, created by the CARES Act, were intended to provide partially-forgivable loans to small businesses to cover payroll, rent/mortgage interest, and utilities. Loan applications opened on April 3. Anecdotally from our clients, the businesses that have had the best success at receiving PPP funding have been those with existing loan relationships with their banks. As of Thursday, April 16, funding for PPP loans has been exhausted. It is not clear whether businesses with pending applications will still receive full or partial funding. Congress is currently considering additional funding for the PPP program.
Economic Injury Disaster Loans (“EIDL”)
The EIDL program provides low-interest loans to affected businesses, including an upfront grant that does not need to be repaid. Initially, the upfront grant was announced to be $10,000 per applicant. The SBA later announced that the upfront grants would be limited to $1,000 per employee, capped at $10,000. Like PPP loans, EIDL funding is currently exhausted and the SBA is no longer taking applications for EIDL loans.
The CARES Act provided additional funding for states to augment their unemployment programs, including coverage for individuals who would not otherwise qualify (especially independent contractors and small business owners) as well as an additional $600 per week for all recipients from March 29 through July 31. Individuals currently receiving unemployment benefits should have started receiving the additional $600, in addition to their regular weekly benefits.
Unemployment coverage for independent contractors and small business owners will be processed through a separate application. As of April 16, this application is not yet available through the Massachusetts Department of Unemployment Assistance. Governor Baker has repeatedly stated that the application will be available no later than April 30, and that all benefits will be backdated to the time the applicant originally qualified for benefits (no earlier than February 2). Currently, we are unaware of any state that has successfully implemented unemployment coverage for independent contractors and small business owners.
What Can Small Businesses Do Now
With the exhaustion of PPP and EIDL funds, many businesses are scrambling to find solutions to stay afloat during this crisis. The following options are viable alternatives for covering expenses during this time:
- SBA Debt Relief. For businesses with existing SBA 7(a), 504, or microloans, the SBA will pay the principal, interest, and fees of these loans for up to six months.
- Other loan programs. Although PPP and EIDL are the most high-profile and favorable loan programs, there are many other loan programs available to help businesses get through this time. These options include regular SBA 7(a) loans, SBA express loans, state programs, and private programs.
- Furloughing workers and unemployment. In Massachusetts, furloughed workers have been receiving their first checks – along with the additional $600 – within 2-3 weeks of applying for unemployment. Although we recognize that many businesses are reluctant to reduce their workforce, unemployment remains a viable option for keeping your business afloat during this period.
- Part-time work and the FFCRA. Workers who are experiencing school or childcare closures can use FFCRA benefits on a flexible basis. For example, an employee could elect to work a 50% reduced schedule to care for their children, and use FFCRA benefits to cover their childcare hours. FFCRA benefits can be fully reimbursed through tax credits. For employers experiencing a business slowdown, this flexible approach may benefit both the employee and the business.
We will keep you updated on any additional developments in these relief programs, especially with any additional funding for PPP and EIDL loans. As always, please reach out if you have any questions or need assistance.