Economic developments from the COVID-19 virus — and the federal government’s responses to them — continue to rapidly evolve. Here’s what is available right now to help businesses affected by the crisis.
Below are some common questions from our customers about current government assistance to help small- and mid-sized businesses (SMBs) rapidly gain more liquidity, answered with the most recent information available to us.
Please refer back to this article often, as some of this information is subject to change.
Q: Does the SBA have a program for businesses that need quick help with liquidity?
A: The U.S. Small Business Administration (SBA) Economic Injury Disaster Loan program is designed to help businesses overcome a temporary loss of revenue. These 30-year loans range in value from $25,000 to $2 million, with an APR of 3.75% for businesses and 2.75% for nonprofits.
This loan program typically assists companies that are based in declared disaster areas, which may soon cover the entire United States as the outbreak continues. For more information about loan resources and guidance during the COVID-19 crisis, visit the SBA’s website here.
Q: What can I do to free up more cash for my business during this crisis?
A: There are several steps you can take to better position your company to withstand the impact of a prolonged economic downturn. This recently published article by C2FO President Sanjay Gupta includes several strategies that businesses can adopt today.
Q: What does the Paycheck Protection Program do?
A: The Paycheck Protection Program (PPP) was created by the $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, a stimulus package passed by Congress in early April to blunt the effect of the pandemic on workers as well as businesses. When the $350 billion earmarked for SBA loans under the CARES Act was exhausted, Congress and President Donald Trump approved a second stimulus bill on April 21 that included an additional $310 billion in funding for the PPP program.
Q: Who’s authorized to help small businesses through PPP?
A: The money earmarked for small businesses in the stimulus packages cover COVID-19-related loan guarantees and other expenses under the SBA. The money will also help fund other SBA initiatives like entrepreneurial development and programs for women- and minority-led businesses.
PPP funding will expand the SBA’s ability to provide loan guarantees to qualifying businesses affected by the COVID-19 crisis between March 1 and Dec. 31 of 2020. The program calls for loans of as much as $10 million to be distributed under the framework of the SBA’s existing 7(a) partnership with approximately 1,800 private financial lenders.
Q: Would I qualify for a PPP loan?
A: Companies that have fewer than 500 employees and have been in business since at least Feb. 15, 2020 are generally eligible. The SBA guarantees the loans, but borrowers will need to apply through banks, credit unions and other lenders. The government’s stimulus bills cap the interest rate on these loans at 4% and allow borrowers to defer payment for six months to a year. Funding through PPP may be available as late as June 30, 2020.
Q: When is it a good time to apply for an SBA loan?
A: As soon as possible. While the amount of funding for SBA loans continues to change, the SBA encourages businesses in need of assistance to apply soon, as the application and underwriting processes are certain to become backed up. It is likely that many small businesses may run out of cash before funding through an SBA loan can be secured. According to a JPMorgan Chase & Co. analysis of nearly 600,000 small businesses, the median amount of time companies had a cash buffer to stay in business was 27 days. For retailers, the median was 19 days. For restaurants, it was only 16 days.
C2FO is partnering with BlueVine Capital Inc. to help businesses that have been affected by COVID-19 apply for PPP loans. Click here for more information on this initiative. If C2FO can help guide you through this process in any way, please contact your dedicated supplier relationship manager at C2FO.
Q: Will there be future stimulus packages if the crisis continues?
A: It’s possible. Billions of dollars remained in the second phase of the PPP program, as of May 15. However, the funding will not likely meet all the liquidity needs of businesses that have been affected by COVID-19. A recent survey by the U.S. Census Bureau found that three out of four small businesses have sought out aid to cope with lost revenue due to the pandemic. Only 38% of those businesses surveyed said that they have received funding from PPP.
Q: Is C2FO currently working with the federal government to help provide funding for companies affected by COVID-19?
A: In an effort to help address the unprecedented challenges faced today by small- and mid-sized businesses, our C2FO executive team is working closely with the federal government and the White House to track current market conditions and to identify ways that C2FO can help effectively distribute the capital necessary for SMBs to survive.
We have also proposed creating low-cost funding specifically for larger companies to pay their small and mid-sized suppliers immediately. Our open letter to governments and central banks about this issue recently appeared in The Wall Street Journal and The Washington Post. Read our full proposal on C2FO.com.
We will have more information about this initiative to share with you soon.
Sources: U.S. Small Business Administration, Forbes, The Wall Street Journal, Bloomberg, Business Insider, JPMorgan Chase & Co.