Congress Provides Financial Relief To Small Businesses Affected by COVID-19
March 30, 2020 – Congress has enacted legislation to provide small businesses several options for financial relief from the COVID-19 crisis.
First, the U.S. Small Business Administration (SBA) has been authorized to offer designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of COVID-19.
The program requires each state to make an emergency declaration request to open up fund access. Governor Ducey has made the request and Arizona is a designated state to receive funds.
The program offers up to $2 million in assistance for each business and can provide economic support to help overcome any temporary loss of revenue. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of COVID-19’s impact. The loans also offer long-term repayment plans up to 30 years, although the term of the loan will be determined by the SBA on a case-by-case basis.
This emergency program is run through the U.S. SBA and is called the SBA Economic Injury Disaster Loan. You can read more about the program – and file an application – at the below link:
The second major program is the Paycheck Protection Program under section 7(c) of the Small Business Act. Under this program, the SBA will administer forgivable loans of up to $10 million per company to provide cash flow assistance to companies who maintain their payrolls during the COVID-19 emergency.
The amount of the loan will be determined based on the businesses’ average total monthly payroll cost. The loans can be used to pay for:
- paid sick, medical or family leave;
- costs related to continuation of group health care benefits;
- employee salaries;
- mortgage payments; and
- any other debt obligations.
The loans will be completely forgiven if employers maintain their payrolls for the period from February 15, 2020 through June 30, 2020. Also during this period, no collected or personal guarantees will be required for the loan. The loans are available through banks and other lenders that issue SBA Loans.
For more information, or if you have questions, please contact one of Gust Rosenfeld’s Business/Corporate Law attorneys.