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How Small Businesses Can Get Help from Coronavirus Stimulus

New deadline for Paycheck Protection Program can help owners retain employees, stay afloat

A sign alerts bar customers that it is closed due to Coronavirus

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En español | Many of the nation's small businesses are struggling financially because they had to shut down temporarily to deter the spread of the new coronavirus. Help has become available through billions of dollars the federal government offered through loans that can convert to grants if the businesses use the money to keep their employees.

As part of the CARES Act signed into law in late March, the government set aside $349 billion for what the legislation calls the Paycheck Protection Program (PPP) that is run by the Small Business Administration (SBA), with an additional $310 billion added in late April. Under this program, small businesses — those with fewer than 500 employees — can take out loans to pay for workers’ salaries, health-care benefits and sick leave, along with other key expenses such as rent and utilities. People who are self-employed or working as independent contractors also are eligible to borrow through the PPP. A new law now permits small business owners to apply for PPP loans through August 8, 2020.

"Securing these funds could make the difference between keeping a business up and running over the coming weeks or being forced to reduce salaries, lay off employees or shutter businesses entirely,” U.S. Chamber of Commerce CEO Thomas J. Donohue said in April.

PPP loans are different from the disaster relief loans that the SBA offers, which also have received additional funding through a recent coronavirus relief law. Perhaps the most significant difference between the two offerings is that loans from the PPP can convert to grants — meaning the business owner won't have to pay back the debt — if certain conditions are met. Small businesses that already have disaster relief loans for the coronavirus pandemic or other earlier disasters are still eligible to apply for PPP loans.

How the Paycheck Protection Program works:

Companies that meet the SBA's definition of a small business can borrow up to 2.5 times their company's average monthly payroll costs up to $10 million.

The amount of money the borrower spent on the following items — and possibly other expenses not listed — during the 24 weeks after the loan was originated is eligible to be forgiven if the business retains its workers.

• Payroll costs (for employees earning up to $100,000 per year)

• Rent

• Interest on a mortgage

• Electricity, water, gas, water, telephone or internet payments

• Transportation costs

The amount of loan forgiveness, however, can be decreased if the borrower reduces its number of employees or cuts their wages by more than 25 percent.

Loans through the PPP are only available through SBA-approved lenders. You can check with your bank to see if it participates in the program or find one through the SBA's website. You also may email the SBA at answerdesk@sba.gov or reach SBA representatives by phone at 800-827-5722. The agency also has set up a page with information about other coronavirus-related assistance available to small businesses.

Bumps likely as loan program ramps up

Because this is a new program, there may be changes or updates to the requirements once the lending process begins. Early into PPP’s launch, advocates for the banking industry, including the Consumer Bankers Association and the Independent Community Bankers of America, voiced concerns that the individual banks that might issue PPP loans had not yet received enough guidance from the SBA.

Some advocates for small businesses also questioned whether the PPP would offer these companies the lifeline they need now that their operations have been unexpectedly disrupted. In particular, critics said the government should provide grants — rather than loans that are eligible for forgiveness — because many small business owners are reluctant to accrue debt even when business is going well.

"The stimulus provides no remedy for the most critical need of small business owners — unrestricted, direct grant assistance. Instead, business owners must apply for loans through an untested system, that is not designed for large-scale economic emergencies, and wait weeks to months to receive the aid they desperately need now,”  John Arensmeyer, CEO and founder of Small Business Majority, an advocacy group, said following the program’s launch. “While loans may benefit some small businesses in the long run, asking business owners to assume more debt is not the solution.”

The SBA said it was working to ensure that entrepreneurs had quick access to financial support that may help them navigate the crisis caused by the pandemic.

"Speed is the operative word,” said SBA Administrator Jovita Carranza. “We remain committed to supporting our nation's more than 30 million small businesses and their employees, so that they can continue to be the fuel for our nation's economic engine."

Editor’s note: This story was updated on July 6, 2020, to note that the deadline to apply for PPP assistance has been extended to August 8, 2020.

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