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How to get help for a small business hit by the virus crisis • Daily Journal of Commerce

Phu Dang, left, the owner of i5 Pho restaurant, receives help from an entrepreneur on Monday as he builds his business in downtown Seattle. Dang closed his business to restaurant customers earlier in the month and had tried to only do takeout in response to the COVID-19 coronavirus pandemic. (AP Photo/Ted S. Warren)

By JOYCE M. ROSENBERG
AP Business Writer

NEW YORK (AP) — Millions of small business owners will turn to the government, seeking help with individual and national cataclysm, the economic devastation caused by the coronavirus outbreak.

The government said it would start disbursing loans to business owners and the self-employed on Friday under the Paycheck Protection Program, part of the $2 trillion relief package enacted last week. For many businesses, this can be the fastest way to rebuild the lifeblood of any business: the cash flow that allows a business to pay its bills.

The program could be vital for the recovery of the economy: small businesses employ around half of private sector workers. According to some estimates, as many as 20 million people will have lost their jobs by the end of April.

Here are questions and answers about financial assistance available through government and other sources:
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ARE THESE PAYCHECK PROTECTION LOANS FREE?

They can be, if used to retain or hire workers. As of Friday, the Small Business Administration is guaranteeing $349 billion in forgivable loans under the bailout. A business with up to 500 employees, including sole proprietors and freelancers, can borrow up to $10 million to be repaid over two years at an annual rate of 0.5%. Money used to pay salaries can be canceled, and some money used for rent, mortgage interest, and utilities can be at least partially canceled. Payments are deferred for six months.

You could technically get the full amount of the loan forgiven. But if you cut jobs – say you had 10 employees, let them go, and only rehire five – the loan forgiveness amount will be reduced and you will have to repay some of it.

But a caveat from the government: Since so many homeowners are expected to take advantage of the loans, it is believed that no more than 25% of the amount handed over can be for things other than payroll – rent, mortgage interest and utilities. So there is a good chance that you will have refunds to come.

You can learn more about loans at https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp.
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HOW CAN I GET ONE?

The government says it will be a quick and streamlined system – some businesses could get money the same day, unlike the weeks it takes to apply for a traditional SBA loan. You can apply to any federally insured bank, credit union, or agricultural credit institution, not just a traditional SBA lender. Most businesses are expected to apply online through a financial institution’s website.

You don’t need collateral or a personal guarantee. But you will need to document your payroll, rent, mortgage interest and utility expenses. The salary portion of the loan is set based on the monthly average of what a business has paid its employees in the year prior to the granting of the loan.
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WHEN WILL MY LOAN BE PAID?
The government will calculate the amount of a loan that will be canceled after June 30. The program covers the period from February 15 to June 30 and owners will have to document the number of workers they employed during this period and how much they were paid.

If you laid off workers, you have until June 30 to rehire them, but the sooner you rehire and start paying them, the greater your loan forgiveness will be.
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CAN I ALSO GET A DISASTER LOAN?

Yes, but …

The SBA provides what are called economic injury or disaster loans. These are intended to help businesses whose revenue losses have left them without working capital, making it difficult or impossible to pay their operating expenses, including payroll, fixed debt payments and bills to pay. But a business that gets a disaster loan can’t use the money for payroll purposes if it also gets a paycheck protection loan.

Disaster loans give homeowners up to $2 million at an annual rate of 3.75%. Loans can be taken out for up to 30 years, but the terms of each loan will be determined on a case-by-case basis and will depend on each company’s financial situation.

Businesses can also apply for a $10,000 loan advance that can be granted within three days, the SBA says. This does not have to be refunded.

Disaster loan applications are made directly through the SBA on its website https://covid19relief.sba.gov/
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WHAT OTHER MONEY IS AVAILABLE?

The Federal Reserve strives to provide loans directly to small businesses. Details have yet to be announced.

States, counties, and cities can provide small business loans or grants. And those who have not yet announced programs can still create some – the epidemic has not yet reached its peak. Check online with your state or local agencies that support small businesses.
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CAN THE SELF-EMPLOYED ALSO GET UNEMPLOYMENT BENEFITS AND A LOAN?

Yes. The rescue program provides unemployment benefits for freelancers and independent contractors who have not qualified for such help in the past. So millions of people, including wedding photographers, graphic designers and writers, who have lost gigs or projects can get unemployment benefits. They are also eligible for Paycheck Protection Loans – but if they have both types of loans, they cannot use disaster loan money to cover their salaries.
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WHAT ABOUT ONLINE LOAN?

Online lenders promise fast money – some pay out loans the same day – and even in the best of times, many businesses with cash flow problems turn to them. But in many cases, the money carries a high interest rate and large payments. And unlike standard loans, the size of a payment may not be predictable – companies like PayPal, for example, will take a percentage of the revenue that enters the borrower’s account.

Keep in mind that even if you end up repaying the full amount you borrowed through the Paycheck Protection Program, you’ll only be paying 0.5% over two years.
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WHAT ABOUT THE CONCESSIONS OF OWNERS AND OTHER COMPANIES?

Many small business owners have been in contact with their landlords, bankers and suppliers, asking for more time to pay. And some have obtained concessions, especially when the company and its creditor or banker have a long-standing relationship.

Any concessions or grace periods you can get, especially if they are interest and penalty free, can be a good way to go. Owners and associates who want to keep your business can be accommodating unless they are also struggling with cash flow issues. It is also true that some, perhaps many, are tough businessmen; some are already suggesting to their tenants and clients that they should apply for government loans rather than help from them.
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THERE IS ALWAYS FAMILY AND FRIENDS, RIGHT?

Certainly. And the people close to you may be ready and willing to help – if they can now. But, to keep those relationships strong, if you get a loan from a loved one, you need upfront and honest communication now and in the future about how the business is doing and when you’re likely to repay them. to reimburse.