for Small Businesses, Independent Contractors and the Self-Employed
Over 30 million U.S. small businesses who make up the backbone
of our economy, and they have all been affected by the recent global pandemic as many businesses have had to close shop, shorten hours and lay off workers. If you are a small business that has suffered economic injury due to the coronavirus (COVID-19), it is important to know that there are many financial resources at your disposal, such as disaster loan assistance from the U.S. Small Business Administration (SBA). Renters and homeowners, as well as businesses, are eligible to apply for the SBA’s no cost, low-interest rate disaster loans even if they do not own a business. (*Disclaimer: Due to daily changes to the economy and an increasing rate of updates, please note that this information is subject to change since time of writing.*) In response to the recent effects of COVID-19, SBA Administrator Jovita Carranza announced that the agency will be granting automatic disaster
loan deferments through December 31, 2020, to help borrowers who are still paying back SBA loans from previous disasters. “The SBA is looking at every option and taking every action to cut red tape to make it easier for small businesses to stay in business. Automatically deferring existing SBA disaster loans through the end of the year will help borrowers during this unprecedented time,” said Administrator Carranza in the SBA’s official press release. “Today’s announcement adds a list of growing actions the SBA is taking to support small businesses. These actions include making it easier for states and territories to request a declaration so small businesses statewide can now apply for economic injury disaster loans, and changing the terms of new economic injury loans to allow for oneyear deferments.”
SBA Disaster Loans
The SBA offers low-interest disaster loans for businesses, private nonprofits, homeowners and renters who need assistance with uninsured costs. Even those insured for natural disaster damage are encouraged to apply for a SBA Disaster Loan The SBA can lend you the amount of your total loss, even if you are unsure about how much your insurance will cover. The Coronavirus Aid, Relief and Economic Securities (CARES) Act, which was signed into law by President Trump on March 27, 2020, provides $349 billion in relief for American workers and small businesses. The CARES Act also established several new temporary SBA programs to address the COVID-19 outbreak: SBA Economic Injury Disaster (EIDL) Loans & PPP (Paycheck Protection Program). At time of writing, the SBA has run out of these funds within two weeks of providing financial aid to small businesses, and the federal government is working on funneling more money to the SBA to carry on their funding programs. However, U.S. Congress reached a deal on a roughly $480 coronavirus relief funding package to continue helping small business and hospitals, and expand COVID-19 testing. This new funding package comes after the initial funds set aside for the U.S. Small Business Administration (SBA) Paycheck Protection Program and Economic Injury Disaster Loan (EIDL) were exhausted in just two weeks — due to over 1.66 million loans for more than $342 billion. The Senate has approved the deal, and now it goes to the House. A few reasons why the funds were exhausted in such a short amount of time is that $6 million was used to cover lender fees and 71 publicly-traded companies, especially restaurant chains, received aid from the Paycheck Protection Program, equating to $300 million, before the money ran out for small businesses. The reason for this is that foreign businesses, large restaurant chains and hospitality businesses successfully lobbied for an exemption to a rule restricting the small business loan program to businesses with 500 or fewer employees. For example, Forbes notes that Shake Shack obtained a $10 million loan and was eligible for the Paycheck Protection Program because it does not employ more than 500 people at a single location. However, the restaurant chain said it would be returning their loan as they had $112 million of cash on hand before selling another $150 million of stock at the time.
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