As small-business owners continue to deal with the financial hardships associated with the coronavirus pandemic, federal, state and local government officials have begun offering financial relief options.
That being said, many are not filled with legal jargon, making it unclear the terms and conditions, as well as who is eligible for these loans.
Here’s a comprehensive guide on some of the details associated with some of the most common relief options available to small businesses impacted by the COVID-19 crisis:
SBA economic injury disaster loans
What: The first option given to small businesses after the COVID-19 crisis began was disaster loans from the U.S. Small Business Administration. These low-interest, long-term disaster loans are available to businesses of all sizes, nonprofit organizations, homeowners, and renters suffering substantial economic injury as a result of COVID-19.
Who’s eligible: In order to qualify, businesses must prove substantial economic injury, where they are unable to pay ordinary and necessary operating expenses.
It’s offered to small businesses, of 500 or fewer employees, or businesses in an industry with an employee-based size standard through SBA that is higher than 500 employees, who were in operation before Jan. 30.
In addition, tribal businesses, veterans organizations, sole proprietorships and nonprofits designated as 501(c)3’s, as well as independent contractors, are eligible.
How does it work: Loans up to $2 million are available with fixed interest rates of 3.75%, or 2.75% for nonprofits, and terms up to 30 years. Although interest will accrue, payments may be deferred for six months.
A new grant now also makes it possible for any business that meets the minimum requirements for applying to receive $10,000 almost immediately. This advance may be available even if your application was declined or is still pending, and will be forgiven.
CARES Act and Paycheck Protection Program
What: President Donald Trump signed the Coronavirus Aid, Relief and Security, or CARES Act, a $2.2 trillion financial relief package, into law last week, allowing small businesses impacted by the COVID-19 crisis to apply for a loan from the federal government for up to $10 million as part of the Paycheck Protection Program.
Up to 100% of the loan is forgivable if all employees are kept on the payroll for eight weeks.
Who’s eligible: This is offered to small businesses, of 500 or fewer employees, that commit to keeping their employees and continue to pay them through the crisis. Businesses in an industry with an employee-based size standard through SBA that is higher than 500 employees are also eligible.
In addition, restaurants and hotels with locations of 500 or fewer employees, as well as independently owned franchises, tribal businesses, veterans organizations, sole proprietorships and nonprofits designated as 501(c)(3)s are eligible.
Those who are self-employed or independent contractors are also eligible.
These businesses must have been in operation before Feb. 15.
How does it work: Businesses are eligible to borrow is 250% of their average monthly payroll expenses, up to a total of $10 million, which is intended to cover 8 weeks of payroll expenses and payments towards debt obligations.
The SBA is expected to forgive the portion of the loans used for payroll, rent, mortgage interest or utilities.
You can apply at any lending institution that is approved to participate in the program through the existing SBA lending program.
All loans under this program are set at an interest rate of 0.5% and maturity of two years, with the payments deferred for six months.
What: Earlier this week, Gov. Gavin Newsom announced that he had signed an executive order, expanding tax relief for small businesses by granting them a three-month tax extension, without penalty or interest.
Now, all small businesses will have an additional three months to file returns and pay taxes, which are now due on July 31. Businesses will also have an extra 60 days to file claims for refund or appeal a decision.
In addition, small businesses the California Department of Tax and Fee Administration is offering a 12-month, interest-free, payment plan for up to $50,000 of sales and use tax liability.
Who’s eligible: Any businesses filing a return for less than $1 million in tax are eligible for the extension, while small businesses with less than $5 million in taxable annual sales can take advantage of the payment plan.
How does it work: Qualifying businesses do not have to file a request for an extension, as this is an automatic extension that will remain in effect until July 31.
The payment plan for qualifying businesses will be due in 12 equal monthly installments, and no interest or penalties will be assessed.
L.A. County Business and Worker Disaster Help Center
If the terms of these relief packages are still unclear, L.A. County recently announced the launch of their new Business and Worker Disaster Help Center.
Whether you are a worker who is worried about the uncertainty of your income or a business owner struggling to keep your doors open, the center offers a location where you can get immediate help, tailored to your specific situation.
This centralized call center and website provide free, one-on-one counseling and support for business owners and workers alike, assisting in accessing state and federal resources, including recent relief packages, filing unemployment insurance claims, and finding employment opportunities, among others.
The Business and Worker Disaster Help Center, operated jointly by the county’s Department of Consumer and Business Affairs and Department Of Workforce Development, Aging and Community Services, is open to answer calls 8 a.m. to 4:30 p.m. Monday to Friday and is accessible in a number of different languages.
To view all coronavirus-related stories, visit signalscv.com/category/news/coronavirus.