7 things you need to know about small business loans as part of the COVID-19 relief program
The Covid-19 epidemic has hit the US economy, already forcing millions of Americans out of work. And without relief, small businesses are in serious jeopardy. Many have already had to close their doors, and the longer the crisis lasts, the greater the risk of never reopening.
Fortunately, there is some relief in sight. At the end of March, a $ 2 trillion economic stimulus plan was put in place. As part of this package, people whose income is below a certain threshold are entitled to a Payment of $ 1,200, and unemployment benefits were expanded to include increases in weekly payments, extended benefit weeks and eligibility for freelancers and concert workers which would normally be excluded from the deposit.
There is relief on the horizon for small businesses too. In fact, around $ 350 billion of the aforementioned package is earmarked for small business loans. But these are not just any loans – they are loans that could potentially be 100% forgivable. If you are a small business owner, here are some things you should know about the new loan program.
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1. You can apply if you have 500 employees or less
This includes restaurant and hotel chains with fewer than 500 employees per location, nonprofits, and faith-based organizations with employees on their payroll.
2. You can apply until June 30
Although you have a little time to apply, loans are granted on a first come, first served basis, so the earlier you move, the more likely you are to get cash.
3. Your loan can be completely forgiven if you focus your funds on payroll
If you use the money you receive to pay employees and cover necessary operating expenses over the next few months, you may be eligible to have your loan canceled. Specifically, you will have to spend 75% of the money you get on salary costs. But to be clear, you can’t cut your employees’ salaries just to keep them on your payroll – if you do, you are reducing the percentage of your loan eligible for a forgiveness.
4. You will not be liable for taxes on your canceled loan.
Canceling debt usually comes at a cost – it can increase your tax liability. But due to the dire circumstances that led to the COVID-19 relief plan, any canceled debt that results from it will not be considered taxable.
5. You can use your loan to rehire employees
If you’ve already had to lay off some of your workers for lack of funds, you can use your loan money, once it has run out, to bring back staff. You will be entitled to a loan discount provided you rehire your employees before June 30.
6. You can qualify for 2.5 months payroll
To arrive at this figure, you will need to calculate your average monthly wage costs from 2019. If you are a new business and were not operational in 2019, you can take your average wage costs for January and February of this year. . year.
7. You can apply for a loan from your main bank
If there is a bank you already work with, your best bet may be to apply for a loan directly from them. The Small Business Administration also has a list of approved lenders on its website, but keep in mind that some banks limit the number of requests they can accept at this time.
Times are tough for many small businesses, but if you own one, you can rest assured that the relief is here. It’s also beneficial to talk to your vendors, owners, service providers, and anyone else you owe money to other than your staff and ask for more flexible payment terms. In an age when everyone is struggling, you might be pleasantly surprised to find yourself at the mercy of flexibility.