How US Government Help Small Business During COVID

The coronavirus pandemic has forced many governments to introduce quarantines, restrict the work of companies and organizations. One of the most affected industries is small and medium-sized businesses (SMEs) which largely support the economies of many countries.

Only a small number of such firms can survive without earnings until the end of restrictive measures. Moreover, it is not known how long it will take to recover after they are removed. Thus, small business help could be a great solution to keep the companies protected from financial losses.

Small Business Help Prospects

According to a report by the Federal Reserve Bank of New York in the United States, among financially “healthy” small businesses, only about 20% have enough money to function normally for two months in the absence of revenue. Among those who are less financially wealthy, there are less than 10% of them.

Therefore, governments have urgently developed programs to help SMEs; one of the main measures is the provision of loans for salaries (usually 70–80%). Moreover, in the United States, such loans can be transformed into grants if firms do not eventually fire workers or hire new ones. Also, Payday loan organizations offer their clients lower-risk loans like, even if your credit score is not in good standing.

Companies and the self-employed should receive at least partial compensation for income lost due to isolation measures imposed by governments. This can be viewed as an analog of insurance compensation for damage caused by a natural disaster.

Otherwise, the business will be burdened with the additional debt which will significantly slow down the economic recovery after the restrictions are lifted, ”says Yves Bonzon of Julius Baer Bank. He believes that the state could (as a one-time measure), transfer funds to the respective companies for rent payments.

It would be “in the general interest.” Thus, small business help makes sense for businesses that have suffered “financial ruin” during the pandemic.

US Business Support Programs During COVID-19

More and more clarifications and instructions appear to the already adopted programs to support small and medium-sized businesses affected by the pandemic. Help programs are divided into federal and state programs.

Federal Help Programs

1. Paycheck Protection Program;

2. SBA Disaster Loan Assistance.

Regional (full-time) small business programs

3. NYC Small Business Program.

Paycheck Protection Program

Paycheck Protection Program is a business help program aimed at supporting small businesses. It was adopted under the signed CARES Act. The amount of the “loan” is up to $10,000,000. The term for consideration and opening of the line is up to 72 hours. Submission of applications is carried out online. The amount of allocated funds is $349 billion. It is expected that only 30% of applications will be covered.

The act implies the support and assistance of individuals and businesses with up to 500 people.

Important To Know:
  1. Getting a “credit” line in the amount of up to 2.5 average monthly expenses (payroll, rent, loan payments, etc.);
  2. The tranche calculation includes expenses for both permanent workers (W-2) and independent contractors (1099);
  3. This “loan”, irrevocable, subject to certain reasonable and logical conditions:
  • Continuation/renewal of payroll (at least 75% of the total allocated amount), payments for real estate, utilities, and interest on loans. If these conditions are violated, then the “forgiven” amount decreases in proportion to the decrease in the share of payroll, and the “unforgiven” part becomes a percentage;
  • This help to small businesses is open to companies whose owners are US citizens or holders of a green card, or if the share of a foreign person is less than 20%;
  • To receive help for small businesses in the form of a loan, you need to contact your servicing bank or any other bank.

SBA Disaster Loan Assistance

BA Disaster Loan assistance is a premier small business help program. It involves the issuance of low-interest loans (3.75%) without commission in the amount of up to $2,000,000.00 for a period of up to 30 years.

In fact, this is a regular loan application including a credit check, financial data, etc. The amount of the loan will be set by the agency depending on the financial data of the organization. Although, there is an opinion that the consideration will be carried out in a “lightweight” and expedited procedure.

Important To Know:
  • Up to $ 25,000 no collateral or guarantees from owners are required;
  • The program assumes the issuance of a non-refundable tranche in the amount of $10,000 regardless of the result of consideration of the application;
  • The tranche must be paid within 72 hours from the date of acceptance of the application. Applications in this small business help program are now accepted in a simplified form as preliminary. You need to wait for the full requests for documents.

NYC Small Business Programs

NYC Small Business Program is an interest-free credit program listed on small business help programs.

Important To Know:
  • NYC Employee Retention Grant Program is a program for companies with 1-4 people, up to $27,000;
  • NYC Small Business Continuity Loan Program is a program for companies up to 100 people, up to $75,000.
Small business help programs prerequisites:
  • The business must be located in 5 cities of New York;
  • Prove that COVID caused at least a 25% drop in revenue compared to the same period last year;
  • Financial viability.