My weekly column doesn’t usually appear on the business page, but given the times and the circumstances and the utter confusion of everything else in our lives, why not mix this up, too?
Most weeks, this commentary is directed at our readers and important topics that impact our daily lives. Today, I want to write directly to the businesses in our community – the ones being crippled by COVID-19, stay-at-home orders, and the general malaise gripping this city, this nation and this world. No matter if you own a small business, work for one, or just care about one, the success of the men and women who run small businesses in our community is reliant on having a free and vibrant economy, of which we have neither.
For those who don’t know, it’s not hyperbole to say that our national, state and local economies all depend on the ability of small businesses to sell goods and services. It’s just as important that small businesses get support from the people who live near those businesses.
Across the entire United States, 48 percent of all people work for a small business – categorized as any company that has fewer than 500 employees.
More impressive, and more pertinent to many of us, is that 18 percent of all employed people in the United States work for a business with fewer than 20 employees.
If those numbers don’t register, here’s all you need to know: Half of all employed people in this country work for a small business. It’s more than a touchy, feely, nice story to say that we should support small businesses; our entire economy depends on their success.
As we’re all stuck in our homes, teaching our children with no clue how to teach, ordering take-out as often as possible, and counting the slow seconds of our clocks, one of the great crises arising from this pandemic is the absolute destruction it has done to small businesses in our community.
Earlier this week, there were national headlines that nearly 25 percent of all small businesses will close, based solely on the coronavirus. But that doesn’t have to happen, and the federal government has put a plan in place to extend the life of every business in our community.
I have a hard time believing there is a small business out there that doesn’t know about the CARES Act, which was passed last week. But if by chance you do not know, here’s what the stimulus bill has done for small businesses.
No matter if a business has been open for 10 years or 10 months, any small business can apply for a forgivable loan that equals 250 percent of one month’s average payroll.
If a SMB has a $10,000 per month payroll, that means they can get $25,000 from a local bank. And while this is described as a loan, the federal government (and your local bank) will not make you pay back the loan if you use the money to pay salaries, rent or utilities.
There are all kinds of questions being posed right now about how the loan works, and while there’s not enough room to explain the details – that’s what bankers are for – I do want to tell small businesses some of the highlights.
First, you’ll need to have good records of your payroll from 2019, or at least the first quarter of 2020, if you’re a new business. For some businesses, that may be difficult, but that doesn’t mean to give up on the loan (more on that later).
Second, you need to use your current bank to get these loans. Communicate with that bank today, if you haven’t already.
Third, you won’t have to personally guarantee the loan, it won’t be used against your credit, and it won’t hurt you down the line, unless you cash out the money and move to the beach.
As members of the U.S. Congress drafted and passed the CARES Act, they really had one purpose in mind: Keep small businesses alive right now and deal with the consequences later. In essence, this is not a stimulus bill, because people can’t go spend money in the economy, thus meaning they can’t stimulate the economy.
Instead, this is a lifeline to businesses, designed to help us make it through the next two months. And once those two months are up, I’d wager a pretty penny that government comes back and pushes through another bill that actually starts to put money back in the economy.
Our business has always been considered a media group, mainly because we publish newspapers and websites full of news. But one thing people may not know is that our business and our accounting staff work every single day with the small businesses in this community and all across Houston.
Like other companies that have transformed what they do, our company has made a transition as well, bringing in a group of accountants who are able to help small businesses get their payroll numbers in order, get their applications completed, get their money, and then spend that money to guarantee the loan is forgiven by the federal government.
If you are a small business, or if you work for a small business, or if you know someone who’s struggling to keep the doors open, and if you aren’t preparing to get some of this stimulus money, please reach out to me at the email address below. There’s not a small business in this country that isn’t eligible for free funding.
There’s no reason for our small businesses to close right now; there’s real help out there. If you need help, let us know. If you have the wherewithal to get your application complete, do it now.
Paycheck Protection Program Details
The U.S. Small Business Administration has released some guidelines about its Paycheck Protection Program. Other guidelines were scheduled to be released after press time. This is the most up-to-date overview.
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.
The Paycheck Protection Program will be available through June 30.
Who Can Apply
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
How to Apply
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
Lenders may begin processing loan applications as soon as April 3.
Loan Details and Forgiveness
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of .5%.
If you wish to begin preparing your application, you can download a sample form (go to SBA.gov for the form) to see the information that will be requested from you.