COVID-19 Resources: Summary of Funding Opportunities For Small Businesses

COVID-19 Resources: Summary of Funding Opportunities For Small Businesses

May 21st 2020

This piece was originally written on March 23, 2020. New funding opportunities are being announced and changed every day, so please check out our Google Doc out for more up to date information and email me at [email protected] to share new funding options that we don't have listed. [Updated May 21, 2020]

As of April 1, 2020, the CARES Act has emerged as the most easily accessible and well-funded source of financing for small businesses. Here are some of the key aspects of the CARES Act and how they apply to your business:

To begin, it’s important to explore your options from the Small Business Administration. The U.S. Small Business Administration (SBA) guide to official coronavirus relief funding options is a great resource for this. These include the Paycheck Protection Program, EIDL Loan Advances, SBA Express Bridge Loans, and SBA Debt Relief. The updated page also includes a tool to find local financial assistance. We’ll explore each of these in more detail below.

  • Payroll Protection Program: The program provides cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven, which would help workers remain employed, as well as help affected small businesses and our economy to snap-back quicker after the crisis. Loans are for up to 2.5x monthly payroll costs (inclusive of health insurance and payroll taxes).As of April 27, 2020, the program has resumed. Find a lender based on your zipcode here.
  • Emergency Economic Injury Grant: These grants provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). All you have to do is apply for the EIDL and then request the advance, which does not need to be repaid. As of May 21st, 2020, only agricultural businesses may apply. If you are an eligible agricultural business owner, apply here.
  • SBA Express Bridge Loans: Allows small businesses who currently deal with an SBA Express Lender to Access $25,000 quickly. This is a great option for eligible businesses who need cash urgently. More information can be found here.
  • Small Business Debt Relief Program: If you have an existing non-disaster SBA loans, the SBA will cover all of your loan payments for six months. This will also be available to new borrowers who take out loans in the next six months.
  • Payroll Tax Credits and Deferred Payments: The CARES Act allows employers (including governmental employers who pay employer FICA tax) to defer payment of the employer share of the 6.2% Social Security payroll tax otherwise due on employee wages for the period from March 27, 2020 through December 31, 2020. Additionally, some companies are eligible for a payroll tax credit equal of 50% of “qualified wages” paid to employees from March 13, 2020 through December 31, 2020. In order to qualify for the credit, you must meet the following conditions: (1) the employer’s operations are either fully or partially suspended by a government order relating to COVID-19; or (2) the employer’s gross receipts during a calendar quarter are less than 50% of the gross receipts for the same calendar quarter during 2019. More FAQ’s on the Employee Retention Credit here.

Here are two more excellent resources summarizing the benefits available through CARES Act:

Additional Note: Soon, the Main Street Lending Program from the Federal Reserve will offer around $454 billion in small and medium-sized business relief funds. The projected availability of that funding is the end of May, and we’ll update this page as the situation develops.

Over the next two weeks, we will be sharing resources to help small businesses during this uncertain time. 

Today’s piece is focused on cash flow and financing. Read on for a summary of funding options that could help cover expenses such as rent, utilities, payroll and working capital if sales have slowed or halted altogether as a result of coronavirus protection measures.

We’ve also created a more searchable spreadsheet of funding opportunities. We will do our best to update the spreadsheet every few days as new funding sources become available. Please share anything we are missing so we can include these on our list by emailing information to [email protected]

  • Understanding your cash position (the first step): Cash Flow Story has a wonderful set of tools to help you get a handle on your cash flow over the next few months, which is an essential step to then making business decisions such as purchasing, staffing and identifying how much funding (if any) to pursue. They are offering this valuable tool FOR FREE for the next three months to help small businesses during this COVID crisis.
  • Federal, state and local loans, and a few grant opportunities: For more detail on these opportunities including links on how to apply, please check out our Google Doc.
    • CARES Act Loan For Small Businesses: A key component of the coronavirus economic stimulus package is the nearly $350 billion fund for small businesses. These loans are forgiveable if companies are able to retain their employees through this crisis and can be used to hire back workers you have previously laid off Businesses with less than 500 employees are eligible for the loans, which can be used for payroll and other expenses, such as insurance premiums and utilities. Unlike the SBA Disaster Relief Loan (described below), these will be managed through local banks, meaning the money be distributed more quickly. 
    • SBA Economic Injury Disaster Loan, up to $2 million at a 3.75% interest rate. Applications are directly through the SBA's website.
      • The SBA recently announced that all qualified small businesses that apply for an EIDL can also apply for a $10,000 advance that is essentially a grant, and does not need to repaid. 
    • State / Local Loans and Grants: Various states and cities have set up loan programs for businesses impacted by coronavirus. Please review this spreadsheet for more information.
    • Conventional SBA and Commercial Loans: If your business has assets, a history of cash flow and profitability and/or an accounts receivables balance, you may qualify for a traditional loan or a conventional SBA loan. With interest rates at a historic low, these are excellent options to consider that also allow for COVID relief to go to companies that can't access credit elsewhere. Contact your local banks for more information.
  • 0% interest rate credit cards: Credit cards are not an ideal way to fund a business. But we are in a unique time, and for some businesses, a credit card that has an introductory 6-12 month period with a 0% interest rate can help purchase raw materials and pay for day-to-day expenses while sales are slow. Loans, like those outlined above, can take a long time to be reviewed, processed and funded. If you anticipate getting a loan in the coming months, a 0% interest rate card can also help bridge you from right now to when loan funds hit your account. This article provides a summary of applicable credit cards with an introductory 0% interest rate.
  • Crowdfunding and/or a sale on gift cards: Many people are looking for ways to support small businesses right now, and you may have loyal customers who want to contribute. Two potential ways to rally customers around your business: sale on gift cards (such as 5% off gift cards to help bring in cash that can be redeemed for products later) and crowdfunding using a platform like GoFundMe. These are unlikely to generate huge sums but the revenue they do bring in is immediate. This article highlights two GoFundMe efforts to support a business through coronavirus.
  • Deferred tax filing and payments: The IRS has moved tax day to July 15th, giving you three extra months to file and pay any taxes you owe. If you qualify for a refund, file immediately. But for those who would need to pay taxes, think of this as a 0% interest loan with the IRS. Many states and municipalities are also following suit, so contact your local Department of Revenue to find out what they have in the works.
  • Payroll tax credits (with accompanying sick and FMLA requirements): Last Wednesday, the federal government signed the Families First Coronavirus Response Act. Note that this act impacts businesses that are able to continue operating during Coronavirus shutdowns (not companies that have had to lay off their workers). The act ensures two weeks of COVID-related paid sick leave and expanded family and medical leave (up to 10 weeks at ⅔ of pay to care for a child who is home due to school or daycare closures). The act is structured to minimize the economic impact of these requirements on businesses. Employers will be able to hold their payroll tax payments to the IRS to cover their cost of qualified sick and child care leave. Details of how to utilize this payroll tax credit are expected to be announced shortly. Click here to learn more. There are benefits in this act for self employed workers as well. QuickBooks has indicated that their payroll systems will be updated by April 1stto allow users to take advantage of these credits. 
  • Deferred payment of payroll taxes: According to this webinar, businesses can defer up to 50% of the employer portion of their payroll taxes for up to one year, allowing businesses to shore up some cash during this crisis.
  • Workshare and partial unemployment programs: Letting team members go is one of the single hardest thing a business leader has to do. For some businesses, this may be an inevitability of coronavirus measures. The Federal Department of Labor is trying to help businesses make more temporary decisions around staffing and ensure laid off workers can swiftly access unemployment benefits. Specifically, the DOL has allowed states to lax unemployment insurance rules - states can now pay benefits if a closing relating to COVID-19 prevents employees from working or if a worker is quarantined, even if employment is only halted temporarily. The DOL also notes that states can waive the seven-day unpaid waiting period for benefits. States are taking the cue and adjusting policies with more lenient policies, more rapid benefits, and workshare programs that allow employers to cut hours and have the balance of these hours eligible for unemployment. Our spreadsheet lists modified UI benefits in states, but for the most up to date information and next steps, check out this site and choose your state
  • Track expenses you incur as a result of coronavirus mandates: New measures will be rolled out at the federal, state and local level each week. By keeping close tabs on the costs you’re incurring now, you’ll be in a better good position to leverage benefits as they are announced. We recommend tracking the following each week:
    • Sick leave or any paid time off (personnel hours and total payroll) related to the pandemic, including workers staying home due to COVID-like symptoms, quarantine, caring for sick loved ones, or caring for children home from school.
    • Changes made to shifts, including the number of reduced workforce hours made to accommodate social distancing or workforce reduction mandates. If you are paying team members for these unworked hours in this reduction, record these costs as well.
    • Supplies you’ve had to purchase workers who are now working from home
    • Supplies you’ve had to purchase and/or services you’ve had to secure to maximize protection against coronavirus transmission in your facility, including cleaning services and disinfectants.
    • Estimated lost revenue as a result of coronavirus measures, both as a hard number and as a total percentage of sales.

If you plan to take advantage of any loan or grant opportunities, we recommend getting your documentation organized as soon as possible. This wonderful article outlines what you want in place before starting an application.

It is so important to remember that (outside of a handful of grants and the forgiveable loans for payroll under CARES Act), most of these opportunities are loans. While they have low or even 0% interest rates, the money needs to be paid back. In thinking about if and how much to request, it is imperative to forecast your cash position and anticipated revenue over the course of the next 6-18 months so you can estimate your ability to pay back any loans. Additionally, unless you are investing in a strategy that is likely to have a strong rate of return (such as a marketing campaign or a new piece of equipment that can help you diversity for your revenue) we caution against high interest loans right now.

Finally, when thinking about funding opportunities, remember that loans and grants take time - weeks or months - to hit your bank account. Balance your strategy with a combination of cost cutting measures, sources of immediate revenue and funding, and low interest loans.

I hope you found some of these resources and ideas valuable. While I’m not a CPA or financial expert, I’d be happy to field any questions about where I found the information above to help you take further action.

In the midst of this uncertainty and anxiety, I have been struck by the country’s focus on supporting small business and buoyed by the fact that everyone - including governments and consumers - seems to understand how essential independent companies are to the economy and culture of our country. I have never been prouder that EcoEnclose plays a small part in helping these businesses ship, grow and thrive. 

Saloni Doshi

EcoEnclose, CEO

[email protected]