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On Friday March 27th, the President signed an economic relief bill-- often called the “coronavirus bill” or the CARES Act-- which includes aid designed to relieve hardship on small business owners (this includes corps, LLCs, sole proprietors and independent contractors). However, the bill itself is over 800 pages long. Yikes! Fortunately, our experts at Nearside have read through the bill, and are here to help you understand what the relief entails, how to find out if you qualify, and where to apply.
The main forms of relief are: individual checks, expansion of state unemployment insurance, and special SMB loans. Today, we'll break down one by one to see how each might help you, and how to get it.
For easy reference, here's what we're covering in this post:
- Individual Checks
- Unemployment Insurance
- Small to Medium Sized Business Loans
- Other Resource and the Nearside COVID-19 Cardholder Assistance program
Individual Checks 💸
The government will be mailing checks to qualified individuals in the amount of $1,200 for each adult, plus $500 per child under 16 years of age in each household. You don’t need to apply or do anything to receive this money. To qualify, the government uses your tax return information for year 2019 (or 2018, if you didn’t file in 2019). There is a phase out, however: If, in those years, you filed single and made between $75,000 and $99,000 adjusted gross income, or for married couples, $150,000 to $198,000, your check amount will be a bit less.
If you qualify, you can expect to receive your check in May, unless you have used direct deposit with the IRS before, in which case, you can expect it as soon as April.
Unemployment Insurance 🧾
Even if you were not previously eligible for unemployment insurance (e.g. you are self-employed, a contractor, or a part-time employee) you are now likely eligible to apply for your state’s unemployment insurance. This is great news for self-employed folks! To apply, all you have to do is self-certify that you are impacted by the coronavirus pandemic. You can click here for more information, including where and how to apply in your state.
Once you start receiving your state’s normal unemployment payments (which can vary, so, ask your state’s unemployment office for exact numbers), you will also receive an additional $600 per week through July 31. Finally, the Cares Act extends your state’s unemployment benefits for 13 weeks-- even if you had previously tapped out on your benefits.
Most people who are not currently working will be eligible for this coverage. Apply at your state’s unemployment office to get these benefits as soon as you can.
Small to Medium Sized Business Loans 🏦
Starting on April 3, FDIC banks (including credit unions) are able to start offering special loans under the Paycheck Protection Program (PPP) to people who own their own businesses. If you are self-employed or a contractor the program starts on April 10. This is a great deal as the loans will be offered at 0.5% APR with a 2-year term and no application fees. The maximum amount you can take out is 2 times the average monthly payroll during your prior year +25%.
However, one question that is still unclear with this program is whether you can apply if you had no employees during the period. Stay tuned as we will update our blog with the latest news. The terms of the loan stipulate that you must use the money for working capital, improvements, payroll, benefits, mortgage or rent payments, utilities and other debt.
One of the biggest benefits to note about this loan is that the government will forgive an amount equal to all expenses you incur for payroll, rent, mortgage and utilities for the first 8 weeks after the loan is made. So, effectively, the loan will turn into a grant for 8 weeks of those expenses, however no more than 25% of the forgiven amount can be for non-payroll costs.
Things to keep in mind when applying
To apply, you should start with the local bank or credit union that you normally work with as you will not have to go through a new lender's Know Your Customer (KYC) / Know Your Business (KYB) process. However, it is important to note that not all banks will participate in the Paycheck Protection Program (PPP) so you should check with them first. To qualify and apply, the only thing that you have to do is complete the application (link below) and provide documentation (like a tax form) that you had payroll expenses in the prior year.
If you are using a new bank or your bank did not vet you before, you will need to go through the bank’s KYC/KYB process, which can take a little more time.
There are no credit requirements for this loan; unlike a regular loan, this loan is fully guaranteed by the government, so the bank is risking no credit, and has no incentive to deny you. In summary, there is no reason for you to not take out this loan when it becomes available at your bank.
Here are some links to learn more about applying for these loan options:
At Nearside, we’re rooting for you during this unprecedented time, and remain committed to helping you however we can.
If you have a Nearside Line of Credit already open, we are also providing a COVID-19 Cardholder Assistance Program to those who qualify. Read more about what we’re specifically offering, as well as a list of general resources for dealing with COVID-19 at the Nearside Blog.
Are you looking for a modern banking solution for your small business? If so, join Nearside and get the business checking account designed for small businesses.