The CARES Act – Just the Facts!

If you own a small business in the USA that:

• was operating on FEB 15, 2019
• employed people on
• have fewer than 500 employees
• suffered substantial economic injury as a result of this declared disaster
• are interested in forgivable loans to maintain staff and pay expenses…

You should apply right now for these relief loans. FULL DISCLAIMER: we are not qualified, nor certified, to offer financial advice – so please don’t base your decisions solely on what you read here.

In short, the opportunity presented by the recent federal stimulus will save thousands of businesses. These loans require no personal guarantees which means that default will not impact your credit rating. The interest rates start low (1%!) and stay low.  Every small business owner should thoroughly understand the three types of programs that will have the most potential impact on their business:

1. Payroll Loans: The Paycheck Protection Program

• Up to $10 million dollars (payroll dependent)
• 1% interest rate with a term of 2 years
• No re-payment required for the first 6 months
• 100% forgiven if you comply with the terms of the loan
• Up to 25% may be used for business rent, utilities…
• Self-employed, independent contractors, sole props eligible (on April 10th)
• No collateral or personal guarantees, and zero fees for the borrower

The so-called PPP is loaning up to $10 million dollars (a factor of your recent payroll totals). If the borrower abides by the terms of the loan, the lender will forgive the amount owed. Yes, you read that right. Step one is putting your hands on complete, correct payroll reports.  Step two beginning the application process, which really consists of completing a short application, business tax ID, acknowledges the terms of the program… and then submit that application through a lending agent. That is typically a bank, but there are other SBA-certified lenders like credit unions and other entities.  At Orchid we have partnered with a lending agent who is currently accepting and processing applications. As of this writing, there are some slowdowns in what had been described as an accelerated approval process, so I should point out as of this writing, few if any loans have been funded. So honestly, a bit of a backlog is building – my advice is apply now.  And yes, you can (and should) apply for both.

2. Disaster Loans: Economic Injury Disaster Loan Program

• Up to $2 million dollars
• Not more than 500 employees
• No re-payment required for the first 6 months
• 3.75% interest rate with terms of 15-30 years
• NOT currently considered forgivable but terms are very favorable
• $10,000 advances are being offered, which do not need to be repaid

EDITOR’S NOTE: If you were recently denied an advance, you can re-apply

For those who have suffered “substantial economic injury” as a result of this declared disaster (and really, who hasn’t?) AND can prove that they are an existing US small business, maybe eligible for EIDL loans designed to enable you to endure this declared disaster.

These loans are commonly issued by the SBA in the wake of a natural disaster to enable regions to recover economically. There is some more latitude in how the money can be used, as compared with the PPP, but the intent is described as “expenses that could have been met had the disaster not occurred, including payroll and other operating expenses”. One element of the program that is not to be overlooked is the emergency advance component. They are offering grants of up to $10,000, delivered in as little as three days after applying, which will not have to be repaid – these advances are in addition to any EIDL loan they may approve for your business.

3. Other SBA Relief Programs

The SBA has long maintained a number of other lending programs, and some of them are being made more generous as part of the CARES Act. If you have a commercial loan and want to reduce that interest rate or lengthen that term, the Small Business Administration may be able to help. You might also consider talking to each of your creditors to determine if they can help you out.

The SBA is also extending bridge loans which can provide near term cash at low-interest rates.  Most of these programs are deferring the initial payments, so whether you to choose the SBA too for payroll loans disaster loans, refinancing, new micro-loan or shorter bridge loans, there are lots of options for both loans and debt relief.

If you already have a non-deliquent SBA loan (either 7(a), 504, or a microloan) I think you’ll be happy to learn the SBA will be picking up those payments for the next 6 months!  If you don’t have an SBA micro-loan and feel like you missed out on that 6 months of free money…  You didn’t, because they are also issuing new microloans (from now until September 27, 2020) at great low rates to help businesses to survive this COVID turmoil, and then to thrive in its aftermath.

If you’re serious about trying to lean in and weather this storm, then capital and employees will be critical components. These programs endeavor to bring both to your operation. My advice is to borrow as much as they will let you and use that wisely to strengthen your business now and position you to emerge operationally when then opportunity arrives. I’ve talked to many of you over the last few weeks and I know you’re hurting more than most. Orchid customers can’t “work from home”.  I encourage everyone to seize this opportunity and to remember that we’re here to help. We’re talking to lots of customers right now and if you need help using messaging to communicate with customers, or pull payroll reports to submit with loan applications, or want to talk about rebooking techniques, give us a call or drop me a line anytime.

Right Now:

• Gather your payroll records for the last three months in one report and the last 12 months in another
• Print and complete the sample application form from the SBA. (The PPP form lives right here and the EIDL form lives right here)
• Always a good idea to read the fine print and fully understand what you’re getting into.  Want to calculator the potential value of your loan?  I think the Chamber did a great job with this loan calculator here. The upshot is, you’ll be told what you’re eligible for and everyone gets the same interest rate – it’s likely the easiest loan you’ll ever get.

With these materials in hand, apply through an SBA-certified lender. Orchid has partnered with one (that link above) but any lender that the SBA certifies is a fine choice.