To be a small business owner during the COVID-19 pandemic is like dipping yourself in a serious financial strait. Unless you’re running a business that offers essential goods or services, such as medicines and groceries, you may consider yourself lucky. The COVID-19 pandemic is unlike any crisis businesses have ever faced. Many are struggling to make ends meet, while others have already succumbed to the financial pressure by going out of business.
The pandemic has brought about a great deal of uncertainty to small business owners. The real problem is others can’t find enough financial aid, especially those who didn’t previously qualify for government loans. Meanwhile, those who have already received those loans have already run out of money. No wonder why many business owners are turning to their commercial bank accounts to apply for economic injury disaster loans.
As many financial programs run out, many business owners are struggling to find information about eligibility, availability, and how to register for funding. The good news is, you just need to be resourceful to find available relief programs. If you’re a struggling business owner who’s planning to reopen their business, this article will provide a clear view of the available financial aid programs for small business owners severely affected by the pandemic.
Paycheck Protection Program (PPP)
The PPP is arguably the most extensive financial program passed by Congress to support businesses this pandemic. The program aims to encourage businesses to retain and rehire employees by providing payroll funding. As long as business owners use the allocated fund in the agreed method, the entire loan will be forgiven.
After authorizing the program in March 2020, the PPP has already distributed over $700 billion forgivable loans to businesses. Since then, the PPP is the widely known relief program for small businesses during the COVID-19 pandemic.
Although the PPP serves as a payroll assistance program, even small businesses without employees are also eligible to apply. These include independent contractors and sole proprietors.
The appeal of the program is its acts as free assistance funding by allowing borrowers to write off the amount once they sign up for forgiveness throughout the 10 months of the previously covered agreement period. The Small Business Administration (SBA) will finance non-bank lenders, credit unions, and private lenders to allow them to issue PPP loans to small businesses.
Restaurant Revitalization Fund
The entire restaurant industry has suffered a great financial impact from the pandemic. Many are attempting to survive, while others have completely closed down. In response to this, the American Rescue Plan act established a $26.5 billion fund for hard-hit food and drink establishments. SBA will award $5 billion to affected entities with gross revenues below $500,000. There’s an allotted $10 million cap for every business and $5 million to fund the physical establishment of the business.
Food businesses eligible for the funding program include restaurants, food trucks, food stands, food carts, caterers, and bars, among others. The great thing about this program is it prohibits publicly traded companies to apply since many smaller operations are largely dominated by bigger businesses during the initial round of the PPP funding.
The distribution of funds is divided into multiple phases and will prioritize those businesses that lost a large portion of revenue. It also includes small businesses managed by veterans, women, and economically and socially disadvantaged entrepreneurs. Instead of letting big restaurants eat up the funds, the program will focus on small businesses that require financial support the most.
Economic Injury Disaster Loan (EIDL)
The EIDL is another financing program run by the SBA, which acts as an economic aid for small businesses and nonprofit groups that experience temporary income losses. Borrowers can use the money to fund the operating expenses and other financial obligations the business cannot cover because of the economic impact of the pandemic.
Although the EIDL is not forgivable, businesses may still find it a suitable option to address their financial issues. In fact, it is possible to apply for both EIDL and PPP, only if they use the funds for different purposes. Eligible applicants are only those located in the U.S. with less than 500 employees. Loans over $25,000 require collateral, while the maximum loan is $150,000.
While the pandemic has left plenty of uncertainties for many businesses, rest assured that your employees, supporters, and supporters will help you survive. Take the time to research the funding programs we listed above to help you survive this financially stressful period. Besides applying for loans and grants, small business owners can get creative by opening opportunities for revenue streams.