There are $ 349 billion in loans and grants in the Coronavirus Aid, Relief, and Economic Security Act (CARES), which President Donald Trump enacted on March 27. They are aimed at small businesses hit hard by the coronavirus crisis that nearly brought the economy to a halt.
The funds are distributed among three small business programs that offer grants and forgivable loans, as well as a loan deferral. The most important are the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan Program (EIDL).
A recent UMA poll showed that 85% of those polled planned to apply for both, which is a smart strategy.
Strengths of the town hall
WBU’s third town hall meeting, held on April 2, focused on the difference between these two loan programs. Here are the highlights of the hour-long conversation, which can also be found here.
PPP allows businesses to borrow up to $ 10 million in loans that are 100% repayable if they do not lay off any employees or if they rehire employees they have already laid off.
EIDL includes a $ 10,000 grant that businesses can get in three days, which they don’t need to repay. The remainder of the EIDL loan, capped at $ 2 million, is non-repayable but may be more flexible than PPP in the types of expenses it covers.
While either can be used to cover wage costs, operators cannot request to use both’s money to cover payroll.
EIDL applications are made through the Small Business Administration, while PPP applications go through a lender.
PPP terms, benefits
The terms of the PPP are a maturity rate of 1% over two years. The first payment is deferred for six months. The loan is 100% guaranteed by the SBA, so borrowers do not need to provide collateral. There are also no borrower or lender fees. Instead, banks ask for four years of tax returns. For those who have not yet filed a tax return for 2019, it is possible to provide a financial statement instead of a tax slip.
“If you spend money on payroll, interest on mortgages, rent, utilities – which includes the Internet, by the way – the loan is canceled,” said Ken Presley, vice president of Legislative and Regulatory Affairs and Industry Relations / WBU COO. . “They want you to spend 75% of the loan on payroll.
Gladys Gillis, CEO of Seattle-based Starline Luxury Coaches, was one of the first to apply for PPP funds, which can provide up to 2.5 times the average monthly payroll. She recommends identifying the people who were hired for part of 2019 and annualizing their salaries.
“Don’t apply too small,” she advised on the call, noting that employer and employee shares of health insurance and 401k can be included as well as wages and salaries. state unemployment insurance.
Back on the payroll
P3 funds are intended to encourage small businesses to rehire full-time and part-time leave workers and put them back on the payroll until June 30. Presley recommends not bringing in employees until there is money in the company account.
Sole proprietorships and independent entrepreneurs are eligible for the PPP. The money can also be used to pay interest on other debts, Presley added.
“The goal here is to put money back into the economy and take care of our people. Someone said, “What do we do with our drivers if we don’t have a driving job for them?” Be creative. There are a lot of other things you could reuse them to do, ”said Larry Killingworth, WBU Interim President and CEO.
Some operators have had problems working with banks, in particular because they are not customers. Banks only work with current and past clients on loans because they have access to financial information.
“If you are still waiting, you may have applied while things are on a different program and need to reapply,” Killingsworth said.
EIDL is expected to provide $ 10,000 within three days of the request. The timing can differ, depending on states and how quickly each is processing requests, Presley said.
The EIDL, which works more like a loan, allows up to 30 years of repayment. But it does require traditional guarantees, except for loans under $ 200,000. Traditionally, EIDL loans have only been available to small businesses that have exhausted all other loan sources, but this rule is lifted for the coronavirus crisis. The SBA, however, requires a review of a company’s tax records.
Rhonda Bilbrey, of Bilbrey Tours in Abilene, TX, said the latest EIDL application was “super simplified” and took about 15 minutes to complete.
Extension of aid possible
With stay-at-home orders extended and major events moved or canceled over the summer months, eight weeks of emergency assistance from the federal government seems too short. Fortunately, Congress appears to be laying the groundwork for expanding aid with a fourth stimulus package that will focus on infrastructure.
The UMA, along with the National Limo Association, recently participated in a conference call with U.S. Representative Ben Ray Lujan, Deputy Speaker of the House, on the needs of the industry, which is likely to be one of the last to stand. to re-establish.
“Congress won’t replace your gross sales but other than that keep us posted on what you need,” Presley said. “It’s going to be a long convalescence to get people to travel again and take them on these trips and coach tours. So keep us posted on your specific needs.
Forms for both loans are available at uma.org/covid19. Join the WBU for the next City Council online Thursday at 2 p.m. ET on the Zoom platform to discuss the most current issues that matter to operators.