Financial Relief for U.S. Agencies During The Coronavirus Crisis

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was formally enacted on March 29, 2020. This act provides over $350 billion in financial relief for U.S. based small to medium sized businesses in the form of a collection of programs that can significantly mitigate the impact of the current economic situation we find ourselves in.

To be very clear: if you are an agency or even a sole proprietor, whether or not you’ve been immediately impacted by the Covid-19 crisis, we strongly recommend you make yourself aware of these programs. 

Even if you’ve found ways to deal with payroll and expenses in the current climate, there is a tremendous amount of uncertainty around both the longevity and the total economic impact. 

These programs can provide a buffer to that risk.

Here is an overview of the specific programs and benefits available to agencies and sole proprietors.

Quick Assistance

Before we break down the programs available and what they mean for agencies and sole proprietors in the U.S., I want to direct you to the U.S. Senate Small Business and Entrepreneurship Committee’s “Small Business Owners Guide to The Cares Act.

It can direct you to full information on the CARES programs available if you’ve got any of the following concerns:

  • Capital to cover the cost of retaining employees
  • A quick infusion of a smaller amount of cash to cover you right now
  • To ease your fears about keeping up with payments on your current or potential SBA loan
  • Just some quality, free counseling to help you navigate this uncertain economic time

If you’re struggling with any of these areas and need help immediately, just visit that guide to get a full explanation and get started. As we cover below, tremendous emphasis has been placed on expediting processing to get necessary funds in your hands quickly.

The Paycheck Protection Program

The Paycheck Protection Program (PPP) is one of the most critical components of the CARES Act. The U.S. Small Business Administration’s (SBA) defines it as:

“An SBA loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19) crisis.”

Who does it help?

Small businesses with less than 500 employees in the U.S., including agencies and sole proprietors.

How does the loan work?

This is the most important element to understand. 

The defining element of this unprecedented loan is that it will be fully forgiven if funds are used for payroll costs, interest on mortgages, rent, and utilities over an eight week period. 

The loan amounts may be up to 2.5x average monthly payroll costs for the last 12 months up to an annual pay of 100,000 per employee. 

So, to put it in very simple terms, the SBA will cover payroll costs for eight weeks through the CARES act.

Another important thing to note here is that no collateral is required for loans under this program, nor are there any fees associated with the program.

There are some stipulations for loan forgiveness, largely driven by keeping employment and salary for employees. Those stipulations are:

  • At least 75% of loan must be used for payroll expenses
  • Forgiveness is based on maintaining or quickly rehiring employees
  • Forgiveness is based on maintaining salary levels
  • Forgiveness will be reduced if in future full time headcount declines or salaries/wages decrease

Even in the case where for whatever reason, forgiveness is not possible but a loan is required, interest rates on the loan will be very favorable.

When can I receive funds?

This is an expedited loan which will begin paying out quickly. According to SBA, lenders will begin processing loans as soon as April 3, 2020. 

How can I apply?

Instructions for application are as follows:

“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. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program. Lenders may begin processing loan applications as soon as April 3, 2020.”

If you’d like to download a sample form to see what will be expected of you when applying, the SBA has made one available here.

Economic Injury Disaster Advance (EIDL) Grant

The other major component of the CARES Act that will be particularly beneficial for agencies is an extremely expedited EIDL grant process

Who does it help?

U.S. based small businesses, including agencies and sole proprietors, who are experiencing a temporary loss of revenue due to the COVID-19 crisis.

How does it work?

Businesses can apply to receive a loan advance of up to $10,000. Again, the critical element to understand about this loan advance is that it will not have to be repaid.

When can I receive funds?

Due to the immediate demand for revenue, funds will be made available within three days of a successful application. 

How can I apply?

Businesses that feel that they are in a position to require this assistance can put in an application to the SBA right here.

Putting It Together

The combination of the Paycheck Protection Program and the EIDL grants will make it possible for agencies to ensure their employees get paid, protect headcount and productivity, and keep the lights on along with additional relief for lost revenue during the Covid-19 crisis. 

We are all together in hoping that this crisis ends quickly and that the proposed two-month relief windows are sufficient to keep things running. We will be sure to keep you updated on any more information about this or future relief options as we get it.