Federal Stimulus offers loans, grants and forgivable loans

Federal Stimulus offers loans and grants and forgivable loans. These resources offer some clarity and detail on the two major loans/grants on offer from or backed by the SDA. We have added notes to clarify details of how these loans are operating based on our best available information:

1.  This clearly written introductory overview from the State Department of Labor and Employment on SBA Emergency Injury Disaster Loans (EIDL) and Grants and the new Payroll Protection Program (PPP).  

1. This side-by-side comparison of the EIDL and PPP (with a bit of caveat related to the cash advance under the EIDL, which is forgiven if an EIDL is awarded; if it isn’t then it becomes a grant). New Federal legislation includes $60 billion for the U.S. Small Business Administration’s Economic Injury Disaster Loan Program (EIDL), which includes $10 billion in emergency grants for businesses. The program comes with up to $10,000 in a forgivable advance on the EIDL, which reduces the amount of forgiveness under the PPP. However, the limit on this cash advance is $1000 per employee and disbursement is very slow.  It seems the EIDL makes more sense than a PPP if a business will not be restoring payroll well before June 30th, it anticipates longer-term impacts than two months, or if it wants to refinance another higher (than 3.75% APR) interest loan.

1. This article from Forbes points out that while the PPP loans can be almost entirely forgivable, the fine print reveals some limitations. For example, only 25% of the loan can be used for mortgage interest, rent and utilities.  On the other hand this Forbes article uses a hypothetical business to share tips like what documents to prepare, the fact that the loans have no prepayment penalty, and any amount forgiven will not be taxed.  It also describes what documents to get ready while waiting for a bank and the SBA sort through glitches in program roll-out.   

1. PPP funds quickly dried up in the first round, but now Congress is about has approved $310 billion more for the program.  But will real small businesses get this loans, as many didn’t last time?  The good news is that there may be some hope as the Treasury Department  has offered clarification that now urges “large companies with adequate sources of liquidity” to think twice before applying based on a “good faith” certification of need.  Additionally, a new provision dedicates $60 billion for community lenders and credit unions that cater to local businesses. This PPP fact sheet was updated with clarifications and updates from Treasury as of 5/6. 
4. To that latter point, if you are just now applying, when deciding on a lender consider asking whether it meets those community bank requirements to get priority loans. Also, try to  use a bank where you have a relationship; particularly as a new relationship will require the bank to do a money-laundering screen of partners and managers.  Those loans that closed in the first round appear to be from local banks and because of long-term customer relationships. 

1. In any case, you must act quickly, as the PPP loan is still first-come-first-served;  so if you are interested you should contact an experienced Colorado SBA lender to get in queue. If you can’t find one, a broker might be worth trying as long as their fees are paid by the banks and they too have SBA experience.  Last, it is possible to apply through multiple lenders if you have concerns about the bank you began to work with.If you’ve already applied for a loan via the PPP or the EIDL program—or both—contact the bank where you applied immediately. Ask if it still has your application and if it will be resubmitted to the SBA when the process restarts.
3. You might also check out this compilation from the SBDC provides many more resources, and is updated regularly as more information comes in and programs roll out. 
5. Last, there is another round of City grant funding available to businesses. Following two successful rounds, there are still funds left for this grant program. The next deadline to apply for these up to $7,500 grants is June 6th. Apply here.

Back to Brick & Mortar

With the City moving to open more and more businesses over time, we thought you would might want to check out this great resource on how to successfully  reopen safely and instill confidence in employees and customers.  Back to Brick & Mortar Guidebook by Access offers best practices and considerations for businesses, compiled with detailed guidance from experts in public health, real estate strategy, communications, and retail operations.  

How to design for re-opening? This model is for a public outdoor market, but contains useful design ideas for brick and mortar too (see guide above for detailed advice).  

Speaking of the out-of-doors, interested in outdoor seating for your business? We are too, and advocating the City to create special COVID-19 rules to allow it without with usual variance process on sidewalks, parking lots, etc.  Let us know if you’d like to work on particular locations for your business or a group of businesses or help with this effort. 

EEOC allows COVID-19 workplace testing, and what this means. 

Advocacy on Outdoor Seating

We are tracking and advocating other strategies in conjunction with other business improvement districts to support small businesses, most recently in connection with the gradual reopening of business.    Based on what we’d been hearing from restaurants and drinking establishments and the goal of ensuring that the bottom doesn’t fall out completely for the small, we grew concerned for the diverse community of restaurants and drinking establishments that so many of us treasure. We drafted this letter to the Mayor calling for urgency in creating flexible and creative rules for expanded outdoor seating with some 50 restaurants, business districts and industry groups signing on.   We ask for the Mayor’s bold leadership on outdoor seating in order to ensure that the re-opening date for restaurants will enable them to take full advantage of the summer season by safety seating customers through an expedited and flexible process. The press picked this up and the Mayor’s office has been receptive.

If you are interested in this and related efforts, please email dshah@westcolfaxbid.org subject line “advocacy”.

Lease & Loan Negotiations

A number of lenders are entertaining loan deferrals, as are landlords re-negotiating leases with short term abatements or concessions in return for an extended term, for example.

Depending on the circumstances, some options include:

• 3 months deferred payment, added to end of lease
• 50% reduction for 3 months
• Interest-only payments, full utilities/CAM fees
• Base rent on reduced revenue-generating square footage (i.e, kitchen only in a restaurant just doing take-out/delivery)

Similarly, property owners and businesses are negotiating with their banks for loan modifications, including:

• Reduced payments
• Interest-only payments
• Loan payment deferrals

Be prepared to demonstrate to your bank how you are being affected by current events and what you’ve done to reduce expenses through salary reductions, staff layoffs, landlord negotiations, vendor and supplier accommodations.

Unemployment

This resource from the Colorado Restaurant Association (but generally applicable to employers in Colorado) goes into the details of unemployment. It includes information on “jobs attached” and “work share” as methods to allow employees to, respectively, more easily collect unemployment compensation but return to payroll, or remain on a reduced payroll while collecting unemployment at the same time. It also has information to share with unemployed employees, and this link has more resources on how they can access a meal.  Finally, note the PPP Fact sheet, question 40 regarding loan forgiveness when efforts to rehire are not successful.