Coronavirus Relief Options: All that you need to know!
The Coronavirus pandemic has shaken the very foundations of all personal, economic, social, and political spheres of human life. This pandemic has affected everyone, in some way or the other. But, Small Businesses have had to bear the brunt of the pandemic the most. This is because most small businesses usually don’t have the funds or the resources needed to face such a global catastrophe. Today, there are many Coronavirus relief options available to businesses so that they can strive through these difficult times.
You shouldn’t have to shut down your business due to the current unpredictable and unforeseeable circumstances. There are relief options available for your business that can help you stay afloat and manage to get by in these difficult times.
In this article, we’ll guide you through all such Coronavirus relief options available for you and your business. We hope that guide helps you in understanding all the financial relief options available to you if the COVID-19 pandemic has adversely affected your business.
CARES Act: The Federal Coronavirus Relief Plan
In response to the Coronavirus pandemic, there was a dramatic global reduction in economic activity. This resulted from the social distancing and lockdown measures meant to curb the virus. These measures included working from home, cancellation of events & classes, reduction of travel, and the closure of physical businesses.
The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, is a $2.2 trillion economic stimulus bill passed by Congress and signed into law by President Donald Trump on March 27, 2020. This came in response to the economic fallout of the COVID-19 pandemic in the United States. And, it is the largest economic relief bill in the U.S. History.
The relief package of the CARES Act includes $300 billion in one-time cash payments to individual Americans. It provides for $260 billion in increased unemployment benefits. It also provides for the creation of the Paycheck Protection Program that provides forgivable loans to small businesses with an initial $669 billion in funding. Additionally, it makes provisions for $500 billion in aid for large corporations and $339.8 billion to state and local governments.
We’ll discuss the relief options provided under the CARES Act in the sections that follow.
Affordable Care Act
The Patient Protection and Affordable Care Act, also known as the Affordable Care Act (ACA) is a United States federal statute enacted by the 111th United States Congress and signed into law by President Barack Obama on March 23, 2010. It represents the U.S. healthcare system’s most significant regulatory overhaul and expansion of coverage since the passing of Medicare and Medicaid in 1965. This law is colloquially known as ‘Obamacare’.
The United States Small Business Administration
The U.S. Small Business Administration (SBA) is a U.S. government agency that provides support to entrepreneurs and small businesses. The mission of the Small Business Administration is “to maintain and strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters”. We can summarize the agency’s activities as the “3 Cs” of capital, contracts, and counseling.
The CARES Act contained $376 billion as a relief package for American workers and small businesses. These funds were allocated to several new temporary programs, most of which are administered by the U.S. SBA. In the following section, we will take a look at all the options made available by the SBA for pandemic relief and support to Small Businesses.
Coronavirus Relief Options available for Individuals and Businesses
SBA Disaster Assistance
The U.S. Small Business Administration is offering all states and territories low-interest federal disaster loans. These are meant for working capital to small businesses and non-profit organizations of any size suffering substantial economic injury as a result of the Coronavirus (COVID-19). SBA Disaster Assistance has played a major role in Coronavirus relief operations.
SBA Economic Injury Disaster Loan
In response to the Coronavirus pandemic, small business owners, including agricultural businesses, and non-profit organizations in all U.S. states and territories can apply for an Economic Injury Disaster Loan. This is one of the prime disaster loan assistance packages provided as a part of the Coronavirus relief package.
The EIDL program provides economic relief to businesses that are experiencing a temporary loss of revenue due to the coronavirus pandemic. EIDL proceeds can be used to cover a lot of working capital and normal operating expenses, such as the continuation of health care benefits, rent, utilities, and fixed debt payments.
These loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits. Loan repayment terms vary from applicant to applicant, up to a maximum of 30 years.
Loans over $25,000 need to be secured with collateral. Payments are deferred for 12 months but interest does accrue during the deferment. They can be deferred for up to four years.
SBA Debt Relief Program
The SBA Debt Relief Program provides payment assistance on the principal, interest, and fees for non-disaster-related SBA loans for up to six months. The Debt Relief program applies to those who had already taken out a loan before the crisis or applied for new loans within six months after the passing of the CARES Act. This is a part of the SBA disaster assistance package.
This relief is available for all 7(a), 504, and Microloans in regular servicing status but not for Paycheck Protection Program loans or Economic Injury Disaster loans. Borrowers do not need to apply for this assistance.
SBA Express Bridge Loans
SBA Express Bridge Loans allow small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. These loans can provide much-needed economic support to businesses and help them overcome the temporary loss of revenue. You can use this to bridge the gap while applying for a direct SBA Economic Injury Disaster Loan.
SBA Paycheck Protection Program
The program helps small businesses keep up with the workers’ paychecks during the pandemic. The program is for small businesses with less than 500 employees, including sole proprietorships, self-employed persons, independent contractions, private non-profit organizations, or 501(c)(19) veterans organizations. This has become one of the most popular programs as there is a high potential of all or the majority of the loan being forgiven.
Economic Impact Payments
As a part of the Coronavirus relief package, the government provided financial relief to qualifying individuals. As per the IRS, all eligible individuals will receive up to $1,200 and eligible married couples will receive up to $2,400. There’s also a separate one-time payment of $500 for parents of each qualifying child under 17.
Tax filers with an adjusted gross income of up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount decreases by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and joint filers with income exceeding $198,000 with no children are not eligible.
On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (FFCRA). This Act provided additional flexibility for state unemployment insurance agencies and additional administrative funding to respond to the COVID-19 pandemic. The CARES expanded the ability of the states to provide unemployment insurance for many workers impacted by the COVID-19 pandemic, including for workers who are not ordinarily eligible for unemployment benefits.
The CARES Act also provides relief options for those worried about not being able to make their mortgage/rent payments amidst the outbreak.
The CARES Act has two mortgage relief options for homeowners with federally backed mortgages. The first temporarily suspends foreclosure while the other allows people to request mortgage forbearance, a process that temporarily pauses or reduces payment.
Student Loan Relief
Under the CARES Act, payments on federally held student loans were automatically suspended through September 30, 2020. You don’t need to do anything to suspend your payments. Also, no interest will accrue on your federally held loans while your payments are suspended.
The CARES Act is a positive step forward to provide economic relief to individuals and businesses facing hardship or economic ruin due to this crisis. There are a lot of economic and financial relief options available to you if you’re facing difficulties due to the pandemic.
We suggest you explore all your options and then decide which suits your situation the best. There is a relief solution that is right for your specific financial condition.
Not sure which relief option is right for you? Our financial advisers can help you reach a decision that is right for you. Get in touch with us today.