During uncertain times, it’s truly heartening to see the federal government step in to help small business owners. It can be difficult to navigate a new stimulus program, especially when you need to stay focused on operations, so we wanted to help provide a simple breakdown for our clients.
What’s happening now?
Last week the federal government approved a $2 trillion stimulus package that in part gives aid to small businesses impacted by the COVID-19 pandemic.
How does the stimulus package help my Home Health franchise?
On Friday any small business with less than 500 employees can apply for the Paycheck Protection Program. The program allows for small businesses like Home Healthcare providers to obtain a loan equal to 2.5 times their people costs, which include payroll, benefits and taxes. If you keep all those employees for 90 days (through June 30th) the US Government will forgive 100% of the loan. The intent is to help businesses, like yours, weather the COVID-19 storm and keep you people so that you will be best positioned for the recovery.
What should I be doing right now?
Only a small number of banks will be approved to issue these loans, so check with your local lender and be careful for scams. Jonathan Morris, President and CEO of Titan Bank, an SBA Preferred Lending Partner based in Texas recommends that, “It is important that you apply early on. There are 30 million small businesses in the U.S. and $350 billion allocated to the program. We expect funds may run out before everyone can receive a loan.. I’d suggest only applying to FDIC-insured bank for PPP loans. Many non-banks are taking applications, but in almost all cases they are simply trying to broker this information to banks in return for a fee.”
What are some strategies and caveats I should think through?
- Laying off employees: Many industries have reacted by laying off employees. The Paycheck Protection Program was specifically designed to encourage businesses not to use this strategy. Also, consider the obstacles around health insurance when laying off or furloughing employees. Speak to your broker to understand if your current health insurance plan allows for temporary furlough.
- Loan forgiveness: Make sure you meet the requirements to have your loan forgiven. If you reduce the number of staff members or payroll costs are reduced by 25% or more after the loan origination, you’ll likely get a reduced dollar amount back during loan forgiveness.
- Payback period: If the full amount of the loan is not forgiven, the unforgiven portion will need to be paid back in two years. This comes with a six-month deferred payment window.
- SBA Economic Injury Disaster Loans: This may be a better option for your business if you don’t carry a lot of payroll or need funds in excess of what you’re eligible for under the Paycheck Protection Program. The downside to an EIDL loan is that you will not be eligible for any loan forgiveness.
When will I get funds from the loan?
Previously, getting a loan through the SBA was cumbersome and took a lot of time. That will not be true for this stimulus package. Lenders are already expanding their staff in order to handle the millions of claims that are expected to come through. In addition, they are reducing the normal amount of paperwork required. The prevailing thought is that checks will start rolling out by the end of next week. (April 10th)
Links to other helpful resources