NH Business Review

Many small businesses breathed a sigh of relief when Congress passed the CARES Act to help prevent them from going under during the Covid-19 outbreak, providing hope that when it is safe to do so, they can bring their employees back and resume operations.

In the last few weeks, many of these business owners were forced to close their doors, which resulted in no income, or brought the money coming in down to a trickle. These business owners have explained how upsetting it has been to be forced to tell employees, some who’ve been with them for decades, that they couldn’t keep them on because they couldn’t make payroll. The reason that happened is most small businesses have very little cash flow — just enough to pay the bills for a few weeks or a month.

No doubt, many of these small businesses will now take loans to try and remain afloat. To help, the CARES Act has been passed by Congress and signed into law. A provision of that act is the Paycheck Protection Program, which offers forgivable loans to keep businesses open with the additional goal of retaining worker’s jobs.

These Paycheck Protection loans will be forgiven with conditions and must be used for payroll or bills such as rent, lease payments, and utilities. The influx of cash is meant to buy the business owner time to save the businesses that they worked so hard to create and keeps the jobs they provide from disappearing.

But there are rules. For example, if the business brings back fewer employees than they had on the job the year prior, the amount of forgiveness would be reduced. And documentation of expenditures would be required for allowable expenses to be forgiven.

The loan is available to businesses with 500 or fewer employees, franchisees, self-employed individuals and a few others. Those small businesses applying will have to certify that the current economic conditions make the loan necessary and support ongoing operations. No personal or individual guarantees are required on these loans.

These Paycheck Protection loans have deferred payments on principal, interest and fees for six months and up to a year after issue. The rate will not exceed 5% and has a two-year maturity rate.

Businesses can also consider a Small Business Administration Economic Injury Disaster Loan (EIDL), but applicants must certify under threat of perjury they believe they are eligible for the EIDL loan.

Those who apply, are also eligible to receive a $10,000 emergency grant that takes only days to issue, although that grant would be subtracted from any loan forgiveness. For small businesses on the edge as a result of this crisis, this important provision will send quick cash to those who need it now to survive.

The SBA’s EIDL loans are not forgivable but may be better for certain types of businesses. The new CARES Act allows businesses with an SBA EIDL to roll them over into the new forgivable variety. Businesses can even apply for both if they are used for different expenses.

The expectation is that very soon any bank that currently is approved to issue SBA 7(a) loans will be welcoming applications for Paycheck Protection loans. And you can apply online. Businesses can contact SBA for information on the EIDL grant and loan.

Bruce Berke is state director of NFIB in New Hampshire, For more information and resources about the loans and loan process as well as mandated leave and tax credits under earlier Covid-19 legislation, visit NFIB.com or NFIB.com/new-hampshire/ for state-specific information.

These articles are being shared by partners in The Granite State News Collaborative. For more information visit collaborativenh.org.