Small businesses have been hit especially hard during the outbreak of the novel coronavirus COVID-19. Safer at home orders, stay at home orders, and shelter in place orders all have a tremendous impact on foot traffic to brick-and-mortar businesses. But for communities where small or “nonessential” businesses have been ordered to close, business owners are struggling to stay afloat financially.
One of the biggest challenges for small businesses is meeting payroll requirements. Recognizing this difficulty, the recently signed stimulus package promises over $370 billion in financial assistance for small businesses. The stimulus package will provide small business loans backed by the Small Business Administration (SBA).
What makes these loans so incredible for small business owners is the fact that portions of the loans will not have to be paid back. Portions of the loans that are spent on payroll, rent, mortgage or utilities would not have to be paid back by the business owner. Instead, they would be paid by the Treasury Department, which is slated to receive $377 billion for the program.
For small business owners, this means that they have the opportunity to participate in a loan program that will not hurt them financially as they try to stay open in the midst of the coronavirus crisis. Business owners will be able to pay their employees without using their personal savings or tapping into reserves. In order to qualify to not repay the payroll portion, business owners must use the money to cover payroll for up to eight weeks, within two months.
The down side to the stimulus package is that it will take some time for everything to fall into place. The SBA-backed loans, for example, could take two weeks to process and finalize. Sadly, many business owners are already at the end of their financial rope. Two weeks could mean the difference between their business staying open or shutting doors.
In the meantime, the government is asking banks to help their customers out and start the loan process now. Understanding that the process is more difficult due to social distancing and business closures, small businesses should start talking to their lenders soon to get the process started.