COVID-19 Stimulus Package: Financial Relief for Nonprofits and Small Businesses
As the COVID-19 pandemic continues to sweep across the globe, more and more businesses in California and throughout the United States have been forced to close their doors or limit their service offerings. This unprecedented medical emergency has also made it much more difficult for nonprofit organizations to raise much-needed funds so that they may continue to serve their communities.
Fortunately, relief is available. If you run a small business or nonprofit in San Diego, you may be eligible for a loan from the Small Business Administration (SBA). These SBA loans are being offered to organizations that have been impacted by the COVID-19 pandemic as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
At the time of writing, the SBA is offering four main programs that charities and businesses can use to access the funding they need to get them through this challenging period:
- The Economic Injury Disaster Loan Program
- The Paycheck Protection Program
- The SBA Express Bridge Loan Program
- The Mid-Size Loan Program
At the Semanchik Law Group, we want to make it as easy as possible for the San Diego business and nonprofit community to apply for and receive a loan from the SBA. As such, we have put together the following guide that explains who is eligible for funding through each program and how the money can be used:
The Economic Injury Disaster Loan Program
As part of the coronavirus stimulus package, the Small Business Administration is offering loans to companies and charities that have been directly or indirectly harmed by the COVID-19 pandemic through the Economic Injury Disaster Loan Program.
Eligibility for this program is limited to organizations that fit into one of the following categories:
- Businesses with 500 employees or fewer
- Sole proprietorships
- Cooperatives with 500 employees or fewer
- Tribal small businesses with 500 employees or fewer
- Agricultural cooperatives, aquaculture enterprises, nurseries, and producer cooperatives that are classified as “small” under the SBA Size Standards
- Businesses with more than 500 employees that are classified as “small” under the SBA Size Standards
- Private, nonprofit 501(c), 501(d), and 501(e) organizations
If your small business or nonprofit is eligible for funding through the Economic Injury Disaster Loan Program, you may receive up to $2 million that you can spend on:
- Payroll expenses
- Accounts payable
- Fixed debt payments
- Other extraordinary pandemic-related expenses
These loans must be paid back within 30 years. The maximum interest rate for nonprofit organizations is 2.75 percent. Meanwhile, eligible small businesses will pay an interest rate that is no higher than 3.75 percent.
If you wish to apply for financial relief through the Economic Injury Disaster Loan Program, you can do so on the SBA website. The application process should take no more than two hours and ten minutes.
The Paycheck Protection Program
The Paycheck Protection Program was included in the coronavirus stimulus package as a means to help businesses and nonprofits keep their workers employed during the COVID-19 pandemic. The following types of organizations are eligible for relief through this program:
- Businesses with 500 employees or fewer
- Sole proprietorships
- Cooperatives with 500 employees or fewer
- Tribal small businesses with 500 employees or fewer
- Agricultural cooperatives, aquaculture enterprises, nurseries, and producer cooperatives that are classified as “small” under the SBA Size Standards
- Businesses with more than 500 employees that are classified as “small” under the SBA Size Standards
- Private, nonprofit 501(c), 501(d), and 501(e) organizations
Organizations that are eligible for one of these SBA loans may receive up to 250 percent of their average monthly payroll costs.
Per the SBA, loans acquired through the Paycheck Protection Program have a maturity of two years and an interest rate of 1 percent. However, these loans are eligible for forgiveness if the business or nonprofit keeps its workers on the payroll for at least eight weeks and uses the funds to pay for:
- Payroll
- Rent
- Mortgage interest
- Utilities
Unlike the Economic Injury Disaster Loan Program, the SBA will not be accepting applications for relief through the Paycheck Protection Program directly. Instead, these loans will be processed and distributed through participating federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions.
Should your organization wish to apply for a loan through the Paycheck Protection Program, you will most likely need to deal directly with a bank or credit union with which you have an existing business relationship.
Lenders may accept applications for Paycheck Protection Program loans from April 3rd, 2020 until June 30th, 2020.
The SBA Express Bridge Loan Program
The SBA Express Bridge Loan Program was added to the coronavirus stimulus package to make it easier for the federal government to quickly release much-needed funds to companies and nonprofit organizations that are struggling because of the COVID-19 pandemic.
This program allows small businesses and charities that have a pre-existing relationship with an SBA Express Lender to access up to $25,000 in a matter of days. Though there are no restrictions on how this funding can be used, the SBA believes that this program will help organizations to bridge the financial gap they are likely to endure while they wait for their Economic Injury Disaster loan to be approved.
If your small business or nonprofit has an existing relationship with an SBA Express Lender, you should speak to them to find out more information about how you can apply for one of these SBA loans.
The Mid-Size Loan Program
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) don’t just make funding available to small businesses and charities. If your corporation or nonprofit has between 500 and 10,000 employees, you may be able to obtain financial relief through the Mid-Size Loan Program.
Since the SBA is still ironing out the details of the Mid-Size Loan Program, information about the application and distribution process is still a little spotty. However, the federal government has released the following key information about this plan:
- The interest rate will be capped at 2 percent.
- Payments will be deferred by six months.
- The funds must be used to retain and re-hire employees
The SBA has stated that they will provide more information about this coronavirus relief program in the coming weeks.
The Semanchik Law Group – Helping Small Businesses and Nonprofits Every Day
At the Semanchik Law Group, we believe that our local small businesses and nonprofit organizations play a huge role in making San Diego such a wonderful place to live. As such, if your organization is currently struggling, and you need an experienced business attorney to help you apply for an SBA loan or COVID-19 stimulus relief, or assist you with your other legal obligations, you can count on us to be there for you every time.
To speak to a member of our team, just give us a call at (619) 535-1811. By working together, we can make it through this crisis.
