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Small Business Relief: A Guide to New COVID-Related Financial Assistance Resources for SMBs (Updated for April 2020)

COVID-19 Small business relief

We’re living in an unprecedented time.

Due to the strain of mass lockdowns across the U.S. as a result of the COVID-19 pandemic, businesses are squeezed harder than ever just to get by.

And the reality is, without help, many won’t be able to.

Fortunately, Washington understands this. 

That’s why, in part due to the recently passed Coronavirus Aid, Relief, and Economic Security Act (or CARES), which designated $350 billion to help small businesses, new programs have been created which are designed to help small business owners make ends meet in this unprecedented financial crisis. 

At Excel, we wanted to do our part to help small businesses– and the country as a whole– recover. 

That’s why we’ve put together this guide, which not only breaks down those new financial resources but also details a few other lesser-known resources you may not have heard about. 

Notice: Available funds have been temporarily extinguished for both the Paycheck Protection Program and EIDL. 

According to the SBA.gov:

“SBA is unable to accept new applications at this time for the Paycheck Protection Program or the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program (including EIDL Advances) based on available appropriations funding.”

Read on to find out more about additional relief options available to your business and learn more about the PPP and EIDL federal programs so that you’re ready if and when additional funds become available. 

COVID-19 Small business relief

Part 1: New Financial Assistance Resources for SMBs (Updated for April 2020)

First, let’s talk about the most important of those resources: the two major and newly available financial assistance resources created as a direct result of the COVID-19 crisis.

COVID-19 SMALL BUSINESS RELIEF

The Paycheck Protection Program

Created in conjunction with the CARE Act, the Paycheck Protection Program is one of the largest small business relief bills ever passed by congress.

The program is designed to encourage employers to retain their payroll during the crisis to help support the U.S. workforce and businesses in the process.

While the program is technically a loan, the terms of the loan state that if you retain all employees on payroll for a total of 8 weeks, and that money is used only for expenses related to payroll, mortgage interest, rent, and/or utilities, the loan will be forgiven in its entirety

Can I apply?

If your business has been affected by the coronavirus, you’re likely eligible.

Small business owners will be able to apply through the SBA or approved lenders starting April 3rd and the application period will run until June 30th, 2020. 

These businesses qualify to apply for the Paycheck Protection Program according to the SBA:

  • Any small business concern that meets SBA’s size standards 
  • Any business, 501(c)(3) non-profit, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act with the greater of 500 employees or which meets the SBA industry size standard if more than 500
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
  • As well as sole proprietors, independent contractors, and self-employed persons.

Will my loan really be forgiven?

According to the CARE Act, the loan will be 100% forgiven and you will owe nothing provided you use the funds for payroll costs, rent, mortgage interest, and/or utilities. 

According to the Act, 75% or more of the funds must have been used for payroll (and those employees must have been retained or quickly rehired) for it to be fully forgiven. 

That means only 25% of the amount forgiven can be used for non-payroll expenses, including:

  •  Benefits
  • Mortgage interest
  • Rent
  • Utilities
  • Or other debt

Also, if payroll drops, the amount of the loan forgiven will lower as well (though no specified percentages are yet available).

And keep in mind that the forgiveness won’t go into effect until the end of the 8-week period of unemployment following the receipt of your loan. 

Lastly, keep in mind that no collateral or personal guarantee will be required to be approved for the program and no fees will be charged by the lender or the federal government. 

How much can I borrow?

With the Paycheck Protection Act, loans can be up to 2.5x the business owner’s typical monthly payroll costs (not exceeding $10 million).

To calculate your average payroll costs to get an idea of how much you could receive, use this equation:

COVID-19 Small business relief

Read the U.S. Chamber of Commerce’s Coronavirus Emergency Loans Small Business Guide and Checklist for more information on the Paycheck Protection Program. 

COVID-19 SMALL BUSINESS RELIEF

EIDL Emergency Advance

A second opportunity for financial relief for small businesses exists in the SBA’s Economic Injury Disaster Loan (or EIDL).

With the EIDL, business owners can receive up to $2 million, with $10,000 of economic relief in the form of an advance that does not have to be repaid, provided you can show you’re experiencing financial difficulty as a result of the current crisis. 

Can I apply?

Any business with less than 500 employees that operates within the 50 states or Washington D.C. qualifies to apply for an EIDL. 

Sole proprietors, self-employed persons, and independent contractors qualify to apply as well.

To apply for an Economic Injury Disaster Loan advance with the SBA, click here

Part 2: Additional SBA resources

In addition to the Paycheck Protection Act and the EIDL, other strictly SBA-related resources exist to help offer relief to small business owners.

Here are two such programs:

SBA Express Bridge Loans

The SBA’s Express Bridge Loan program offers $25,000 to business owners who already have a relationship with an approved SBA Express Lender.

These loans can either be used as standalone term loans or as bridge loans while applying for an EIDL. 

If your business is in an urgent need of cash, an Express Bridge Loan could be just what you need to make payroll while you wait for the programs mentioned in the previous sections to come through. 

Keep in mind that an SBA Express Bridge Loan will have to be repaid. However, if you use it as a bridge loan until you’re approved for an EIDL, that can be used in part to forgive a portion of your Express Bridge Loan (up to the amount you were approved for). 

SBA Debt relief

In an effort to further help small businesses during the crisis, the SBA has temporarily amended the policy of its other loan products.

That includes a few points, according to the SBA’s official debt relief page:

  • “The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months.
  • The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.”
  • Also: “For current SBA Serviced Disaster (Home and Business) Loans: If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020.”

In addition to this, all new traditional SBA loans issued will offer the same incentives as usual but with deferred payments

For more information, read up on the SBA’s debt relief efforts here

Part 3: Additional relief resources for small businesses

In addition to the relief programs we’ve mentioned so far, several businesses and banks have stepped up to do their part to offer help to small business owners.

Here’s a list of all COVID-related relief resources we’ve located so far, a list we’ll keep updated as more become available:

We’ll get through this together

If there’s one thing the coronavirus pandemic has proven, it’s our resilience– together. 

No one knows when the pandemic will end, but one thing is for certain: we’ll get through this together.

So let’s come together and each of us do our part to help rebuild in the wake of our collective hardship. 

Guide to USDA Business Loans

USDA Business Loans

If your business exists outside major cities in rural American, you know the disadvantages that come with the territory.

It’s hard to get supplies and shipments, harder to meet with clients and customers, and not really possible to entertain them as guests when the need arrives. 

Plus, there’s the problem of inadequate access to certain basic resources like printing services, a local post office robust enough to offer all the shipping supplies you’ll need, not to mention a reliable Internet connection in many cases. 

The USDA understands the unique challenges that face rural-based businesses, so they sought to help out by doing what they can. Hence, USDA business loans were born.

USDA Business Loans

What are USDA business loans?

Referred to as the USDA Business and Industry (or B&I) program, the USDA offers a business loan program to small businesses located in rural areas. 

The purpose of the program is to both support small businesses and create jobs in rural communities. 

Similar to the SBA’s business loan programs, the U.S. Department of Agriculture themselves don’t offer the loan but rather guarantee a portion of the loan for lenders, who can then pass on the savings to you. 

What can you use a USDA business loan for?

USDA business loans have a variety of uses, including:

  • Working capital
  • Inventory purchases
  • Equipment and supply purchases
  • Debt refinancing 
  • Updates, repairs, and general development
  • Agricultural production of various kinds
  • And real estate development

USDA business loans can be used for pretty much anything so long as it’s tied to the growth of the company in some way.

And they’re also available to nonprofit organizations, making them a great funding option for rural nonprofits of all kinds. 

How do I qualify for a USDA business loan?

Qualifying for a USDA B&I loan can be a bit tricky, as they have pretty extensive qualification requirements. 

However, that’s mainly to make sure that the program is going towards helping the businesses that it’s designed to help. 

To qualify for a USDA B&I loan, you’ll first need to be located in a rural area. According to the USDA.gov website, you qualify under this section if:

  • Your business is located in a rural area “outside of a city or town with a population of fewer than 50,000 people.”
  • Your headquarters is based in a larger city “as long as the project is located in an eligible rural area.”
  • You must be located in the U.S.
  • And projects can be funded “in rural and urban areas under the Local and Regional Food System Initiative.” The USDA suggests checking the eligible addresses for Business Programs here.

Next, you’ll also need to be one of the below types of businesses:

  • For-profit
  • Nonprofits
  • Cooperative
  • Federally-recognized tribe, or
  • Public body

However, keep in mind that these types of businesses are ineligible:

  • Church-based organizations
  • Lending institutions
  • Insurance companies
  • Charitable organizations
  • Gambling establishments
  • Fraternal organizations
  • Raceways
  • And golf courses

Finally, you need to meet these additional requirements:

  • Must be a U.S. citizen (or permanent resident): If it’s a business, 51% or more of the business must be owned by U.S. citizens or permanent residents.
  • 680+ Personal credit score: For businesses, this includes a history of on-time payments and no negative marks such as bankruptcies and judgments.
  • Collateral necessary
  • Personal/Corporate guarantees
  • Some types of insurance in certain cases
  • Complete a feasibility study
  • Business must be in good standing

Is my business in good standing?

In terms of USDA business loans, that last one includes a few things.

First, you must have enough cash flow to show that you have the ability to pay back the loan. 

Second, your business must have a positive ‘tangible balance sheet equity position’ either of 10% if you’re an established business or 20% if you’re new. 

What does that mean? 

Tangible balance sheet equity is: 

Your balance sheet – Intangible assets = Tangible balance sheet equity

*Intangible assets include things like amortization of a loan, client and customer lists, and patents, trademarks, and copyrights. 

Also, keep in mind that the lender you choose to work with may have additional qualification requirements on top of the USDA’s factors. 

Be sure to check with your lender to find out what their additional qualification requirements are.

USDA business loans terms & rates

While the lender you work with will specify your exact loan details, the USDA has certain universal guidelines in place for all USDA B&I loans no matter who offers them:

Here’s a breakdown of all USDA loan amounts, terms, and rates: 

USDA business loan amounts

There is no hard maximum on USDA business loans, which can reach above $10 million dollars. However, the typical range is between several hundred thousand to a few million.

How much you’re approved for is based partially on what you’ll be using the loan for, what the USDA calls the “loan-to-value” ratio. 

Depending on what your loan-to-value ratio is, you’ll need to make a down payment to cover the remaining amount of the value of the loan. 

For example: 

USDA Business Loans

So, if you’re looking to purchase or rent several large pieces of construction equipment for a building project totaling $250,000, the USDA loan would cover $175,000 while you’d need to make a down payment of $75,000.

Now, let’s talk about USDA loan terms. 

USDA business loan terms 

Similar to USDA loan amounts, their terms depend on what you’re using the loan for as well. 

For example:

USDA Business Loans

Keep in mind that if you’re using the loan for several different uses in one– for example, a real estate development project where you’re purchasing land, equipment, and hiring workers– your loan will be blended based on the various different purposes, essentially taking on the form of several separate smaller loans.

USDA business loan interest rates

Lastly, USDA interest rates are competitive, often being similar to SBA loans at between 6-9%. 

However, keep in mind that your interest rate is set by your lender, so make sure to check that you’re getting a competitive rate before signing any agreement.

In addition to this, your interest rate can be fixed, variable, or a combination of both. 

In addition to interest, there are a few USDA loan-specific fees, including:

  • Guarantee fee: 3% of the guaranteed loan amount
  • Renewal fee: 0.5% annually (from the outstanding principal)

Keep in mind that, similar to your interest rate, this doesn’t include any potential lender fees that might be in your agreement, so make sure to check before finalizing anything. 

How do I apply for a USDA business loan? 

Does a USDA B&I loan sound like a good fit for you?

If you believe you qualify for a USDA business loan, you simply need to find a lender who offers USDA loans.

Remember, the USDA doesn’t offer business loans directly, but through other lenders who they’ve approved to offer their loan program.

How does it work? 

Your lender will take the information and submit your application to the USDA for pre-approval. A USDA rep will then meet with you and your lender to determine eligibility.

Once it’s been pre-approved, that’s when you’ll be able to submit a full application to the USDA.

How long does approval take?

According to the USDA.gov website, approval takes anywhere from 30-60 days from the date you submitted your official application, with funding taking 30-90 days. 

What do I need to apply for a USDA business loan?

To apply for a USDA loan, you’ll need financial documents, which may include:

  • Personal + business credit report
  • Bank statements
  • Balance sheet
  • Profit & loss statement
  • Cash flow projections up to 2 years
  • Business plan
  • Resumes of all business owners

Keep in mind that additional documents may be requested based on your specific situation. 

However, in general, it’s best to get everything together that you have in advance just in case, so the approval process isn’t slowed down. 

Frequently Asked Questions

How much can you get approved for with USDA business loans? 

There is no hard maximum on USDA business loans, though they typically don’t go any higher than $10 million. How much you can get approved for depends on several qualifying factors, so you’ll need to submit an application to see what you’re approved for. 

Does the USDA do small business loans?

The USDA offers small business loans through its USDA Business and Industry program, a loan program that backs loans for rural-based businesses and business projects to help grow small businesses and develop jobs in rural areas.