Business Aid and the CARES Act
Hey, I’m Kami Cortez. I am part owner of Fleet Wrap Headquarters and Cortez Visual Communications. Our company’s been wrapping commercial vehicles nationwide for over 10 years and we have done over 11,000 wraps. We deal mainly with other businesses.
Because we work so closely with businesses and helping them grow, I thought it was important to make a video to just get the information about available business aid out there and the new act that was just passed yesterday, March 27th.
It was in response to the economic downturn that our country’s experiencing because of the pandemic that’s going on. It’s known as the CARES Act and it’s really going to be huge for small businesses everywhere. I just think it’s important that other businesses know about this and take advantage of this business aid opportunity. There is a lot of stuff in this bill. There’s a lot of information to sift through.
I just took it upon myself to do my own research, for Fleet Wrap Headquarters and I just thought I would pass that information along to you. Hopefully it helps you out just a little bit, if nothing else, just to kind of get you to know what you need to do next to take advantage of newly available business aid.
I’m just going to be doing a quick summary. Again, it’s just so when you walk away from this, hopefully you know your next couple of steps.
I do accounting, I’ve been in accounting for over 20 years. I’ve also worked as an accountant for the Phoenix Suns for many years and now I do the accounting for Fleet Wrap Headquarters and I do accounting for just a handful of other companies as well.
I don’t have all the answers, but like I said, I’m just trying to give you a good understanding of what you need to focus on in this business aid bill. This is a federal bill, so every state might have other business aid resources available to you as well. I would encourage you to reach out to your state Small Business Administration (SBA) representative.
Usually you can do that by going to sba.gov and putting in your state and then your representatives phone number will pop up. I would also encourage you to talk to your accountant or lawyer for any other questions you might have regarding this.
Economic Disaster Loan – How to Apply
So there are two loans involved in this bill that I want to really focus on. The first one is the Economic Disaster Loan or EDL. This loan actually already existed before this bill was passed, but it has been enhanced by the bill. This is an SBA loan. You can apply for it going to sba.gov/disaster.
Economic Disaster Loan – Terms
It is backed by the SBA and it has a cap of $2 million dollars. This loan has very attractive interest rates and the thing about this loan is that when you apply for business aid and after you’ve heard back from them, they are going to give you $10,000 before you get the rest of your loan money.
The $10k Bridge from the EDL
So what this is, is they understand that it’s going to take awhile to fund this loan for you and they’re just trying to bridge that gap of time between when you actually get your business aid loan money and as it’s all being processed, they’re going to give you $10,000. Then if you choose to take the loan, that $10,000 will be subtracted off the total amount of the loan that you’ve been approved for. If you choose not to take the loan, you still get that $10,000.
This $10,000 is more of a grant that you don’t have to pay back so if nothing else, I would encourage you to go to sba.gov/disaster and apply for the loan. Even if you don’t take it, if you decide you don’t want it, you’ll still get that $10,000 that you don’t have to pay back.
When to Expect a Response from SBA
So the thing with this loan, the website was getting bogged down and if you tried to apply a couple of weeks ago, it was very, very slow. They have since updated it. So now when you go on, instead of applying directly on the website, when you go onto their website, a page will pop up that will have a list of all the different business aid forms you need to fill out.
You can then download those business aid forms, fill them out, and then upload them back onto their website. And then you’re considered applied.
It does take a few days to hear back from them. When it was first being rolled out, they were saying 5 to 10 business days. Now they’re saying two to three weeks before you hear a response. But again, you will hear a response eventually.
If you have applied for that business aid loan already, but you haven’t seen that $10,000, this is because the $10,000 again, was just passed as part of the bill, yesterday, March 27th. So they are going to work on getting that $10,000 out to those who have applied as soon as they can. They’re working on it and they’re going to get to it, that’s just why you haven’t seen it yet.
Payroll Protection Loan – How to Apply
So the next loan in this bill is the Paycheck Protection Loan. This also came about in the CARES Act and it’s a 7a loan. So this loan you can actually get by going to any FDIC bank, so you don’t have to apply for it through the sba.gov website. You can actually walk into anything that’s FDIC insured, and talk to any of their loan advisors and they should be able to get you applied for this loan.
So this again just passed. So they’re hoping to have banks ready to accept those applications by the end of next week. They’re seeing two weeks at the latest is what they’re hoping.
Payroll Protection Loan – Terms
So this business aid loan is huge. In this loan a business owner will be able to borrow up to two and a half times their average monthly payroll. So you take the most recent 12 months worth of payroll, get the average of that for a month and multiply that 2.5 times. And that’s about the amount that you’re going to be able to borrow. It does cap at $10 million.
Also you’ll be able to add into those costs things like mortgage interest, utilities, health insurance premiums, possibly contract labor. Again, a lot of these details still haven’t been worked out because this bill is brand new and once it is worked out, from all the research I have done, the people are saying that, it should be more generous than maybe what they initially thought.
So there they might include other costs as well. It’s going to be your overhead type costs, but again, you’ll be able to get a good idea of what that is by multiplying your monthly payroll by 2.5. And then adding in things like rent, utilities, mortgage interest.
The thing about this loan, it’s going to be a lot easier than usual to get approved. Things like, collateral and personal guarantee regulations have all been waived for this loan. You don’t have to be able to prove that you weren’t able to get credit anywhere else like you normally do on an SBA loan. All that’s going to be waived.
It’s going to be fairly easy to get in there and get it. And I know too, the idea is that you leave that same day with money in your account, if not soon, soon after that.
Payroll Protection Loan – Payback
So the other really cool thing about this business aid loan, the money spent on those costs that we had mentioned, the payroll costs, the health insurance premiums, the mortgage interest on all of those listed costs, any money spent on those costs within the first eight weeks of when you get the money, that’s going to be forgiven. So it’s basically like a grant.
You’re going to be given a grant by the government, you don’t have to pay that back and then whatever money is left over that then will be rolled into an SBA loan. And that loan too will have very attractive interest rates. They’re saying up to 4% and it’s going to have a maturity of 10 years. So that’s the remainder of your money after that first eight weeks, then those payments will then you can defer payments for 1 year as well.
Payroll Protection Loan – Stipulations
If you lay off employees or reduce their hours, your loan will be reduced by the same amount. If you’ve already laid off employees, if reinstated before June of 2020, then the amount of your loan will remain the same. So they’re really trying to encourage business owners to not lay off employees if they don’t have to. And they’re trying to do everything they can to incentivize for that.
Take Away From All This Business Aid
So what you can take away from all this, what things that you should do right away:
- Do not lay off employees if you don’t have to. If you’re not down to your last dollar, do not lay off your employees, let this roll out. It’s all going to be worth it. The business aid is going to be there to really help you be able to hang on to them.
- It does not cost money to apply for any of these loans. So I would say apply for the business aid loans. Apply for the EDL loan on sba.gov/disaster get that ball rolling because like I said, it’s been bogged down so it’s going to be a while before you hear from them.
- Get the ball rolling and then if you already have applied for an EDL loan. If you already have money from an EDL loan, if accepted, you can roll that into your payroll protection loan. So if you get a 7A loan from the bank and you already have money from the EDL loan from sba.gov/disaster you’ll be able to roll that money into your new loan. I would just apply for them and then you can figure out your options are as details become available. So I would go to sba.gov/disaster to apply for that.
- Then I would contact a loan advisor. If you have one that you’ve worked with in the past, I would contact them or contact your bank. If it’s FDIC and get a loan advisor, set up an appointment, get that ball rolling as well. Hopefully by the end of next week, they’re able to apply for this new 7A loan. But if not, just get that ball rolling so that you have that relationship and you’re having that conversation.
Do those things and then hopefully, as more details come out, you’ll be ready to make those decisions.
Thanks for watching.