Small Business Survival Guide to Combat COVID-19

By Daniel Lewis
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With the ongoing Corona Virus running rampant, small business owners are being hit particularly hard. Small retail outlets and restaurants are often only surviving from month to month, without any cash reserves. If a lease agreement is not forgiven, then it could be game over for many of them. 

To avoid being hit, a number of relief programs are available from Government departments. Banks and large financial institutions are being incentivized at the Federal level to provide relief for local businesses, including a reduction of ATM and credit card fees.

There are also a number of other resources you can make use of that are still doing business despite the crisis. As grim as it may be, there are many avenues available to you, once you stay calm.

Corona Virus Overview – What is Going on?

The current state of global affairs is right now in dire straits. Businesses are closing with no end in sight. To offset some of the financial pain endured by small business owners, government departments stepped in and provided various forms of relief, primarily through the Small Business Administration. Other persons, such as homeowners, renters, and employees, have similar protections coming online.

For example, New York mortgage payments have been suspended at the behest of Governor Cuomo. This means that people who are the victims of financial hardship do not have to make mortgage payments for 90 days. Similar measures are in place all over the USA.

Unfortunately, most of this relief is not available to the self-employed class. Small business owners are by far the worst hit. Nearly all of the stimulus packages are geared towards employees who have lost their jobs, as opposed to employers who lose their business.

This is causing considerable controversy as business owners are claiming that they do not have an appropriate safety net in place. 

Restaurant owners, hair salons, hotels, and other small companies are especially vulnerable, as all of these places are closed and are unable to do any type of business – yet they still have to pay rent and utilities. The travel industry has been decimated. If you have been affected, here are the top 8 places to avail of financial remuneration to survive the onslaught.

#1 – SBA Paycheck Protection Program

The SBA Paycheck Protection Program (‘PPP’) is a new protocol created under the 2020 CARES Act. The CARES Act was introduced to combat the financial implications of the Corona Virus for all citizens. The PPP aims to provide relief to small business owners who cannot currently pay wages, rehire employees, and cover overhead. It is the primary relief package under the CARES Act.

As of June 12, the program still had nearly $130 billion available for small businesses.

It provides up to 8 weeks of relief with no fees or interest. In addition, the funds can be used to pay for rent, utilities, and mortgages. Wages and salaries must stay the same, and fired employees must be rehired. More details on the now-defunct program can be found here. Many are saying that the 8 weeks of Paycheck ‘forgiveness’ will not be enough to prevent the fallout, and will have to shut their doors anyway.

#2 – SBA Economic Injury Disaster Loans

The SBA Economic Injury Disaster Loan (‘EIDL’) is perfectly suited to the current economic crisis. It can provide up to $2 Million to businesses that suffered economic injury as a result of a disaster. They must be in an area that has been officially declared to have undergone a disaster. Aside from the PPP, this is the second strongest arm of relief underneath the wider CARES Act.

However, like most of the SBA disaster programs, it has run out of funding. No new applications are being accepted and it is currently only providing $10,000 of relief to affected enterprises. Updated! The EIDL program is now all but closed, only accepting applications from those in the agricultural industry. No new generic applications are being accepted and it is currently only providing $10,000 of relief to affected enterprises. The $10,000 relief is known as the Economic Injury Disaster Loan Advance (EIDL Advance). It is effectively an advance on the EIDL loan. The funding underneath this particular program is set to increase to $15,000 in the near future. Like the straight EIDL program, only agricultural companies are eligible following the recently updated criteria.

#3 – SBA Express Bridge Loan

The SBA Express Bridge Loan allows businesses that currently have an Express Loan to gain access to $25,000 quickly. This loan is specifically designed to ‘bridge’ the gap while applying for other kinds of loan, such as the EIDL Advance or the PPP.

This loan is a little less appealing in the sense that it must be paid back when relief is granted in contrast to some of the other options, such as the EIDL or PPP. However, in many instances, you will not have to repay the loan. For example, you could apply for the PPP so you won’t have to cover payroll/wages for an 8 week period.

While there is a backlog right now, the Express Bridge Loan could easily tie you over until these funds become available. The turnaround for this loan is quite swift. It is a pilot program allowing SBA accredited lenders to lend up to $25,000 immediately to certain applicants.

#4 – SBA Debt Relief

Businesses that are currently taking advantage of the SBA 504, SBA Microloan, or SBA (7)(a) can have all fees, including the principal, waived for 6 months. In effect, this means that all of your debt payments can be effectively wiped out if you apply under this program.

These loans are often not small. For example, the SBA 504 commercial real estate loan can be up to $5 Million, and the monthly interest on this can be large in dollar amounts. The SBA Debt Relief program is a new offering designed specifically to assist businesses suffering from the COVID-19 fallout.

Effectively, most loans that you currently have should be forgiven payments during the current period. Both commercial and state loans are forgiving payments on existing loans, for at least 30 days. So you should have a lot of flexibility. Reach out to all lenders to see if you can get an extension of some kind, even outside of the SBA program.

 #5 – Online Business Loans for COVID-19

Online lenders are almost certainly the best bet in the midst of the COVID-19 crisis. This is because online lenders like Kabbage, OnDeck, Lending Club, SmartBiz, and LoanBuilder are famous for 3 things:

  1. Low Eligibility Requirements.
  2. Lightning Fast Funding.
  3. Opaque Terms and Conditions.

Right now, the most important thing for a small business owner is to get funds without delay. A typical bank loan can take months to complete with many documentation requirements. And it’s not possible to meet people in person without danger of contracting the virus.

But the online lending process can be done without meeting anybody in person. With lenders like Kabbage, you don’t even need to take a call. The money can be in the account as quickly as the next business day, after completing a 10-minute application. 

The requirements will usually be $50,000 in annual revenue, a minimum credit score of 550, and 3 months of bank statements for verification. This is usually all that you need, though some online lenders will have different requirements. With the speed of application and the speed of delivery of funding, online lenders are ideally suited for the COVID-19 crisis.

#6 – SBA Microloan Program

Microloans are loans available from the SBA that are under $50,000. Microloans are available mainly to small businesses in underprivileged areas. They are also typically granted to minority businesses run by women, veterans, Hispanics, African Americans, etc. These businesses must be for-profit and must be located in the USA.

The criteria for qualifying for these microloans are quite low. A credit check is not required unless the amount is over $20,000. The borrower cannot already owe more than $50,000 at the time of application. The maximum term of the SBA microloan is 6 years, which is a very long term. No physical collateral is required, though a note of collateral must be signed.

Microloans are processed much more quickly than typical SBA (7)(a) loans. However, it is still not as quick as the emergency funds that are available. There are better options available. A microloan is not a line of credit but a term loan. Eligible uses include inventory, wages, working capital, equipment, and machinery. More details can be found here. 

#7 – Business Interruption Insurance

Business Interruption Insurance is a typical insurance policy that most small business owners should have taken out. In fact, it is designed specifically to prevent these kinds of challenges. Business Interruption Insurance is supposed to cover any kind of business interruption that affects wages, fixed costs, loan payments, etc. Many insurance companies are currently trying to default on their loan obligations, claiming that COVID-19 is a natural disaster. 

However, policymakers are in the process of forcing the insurance companies to make good on their obligations. In California, the commissioner has issued a notice forcing companies to cover COVID-19 claims. This kind of insurance is most typically for larger companies. Only 33% of small businesses get it, according to the American Action Forum. The issue remains quite controversial at present.

The President, and many other state senators, have made statements to the effect that insurance companies have to pay, even where there are specific exemption clauses in place. Multiple bills have been introduced by states including Massachusetts, Ohio, New Jersey, New York, California, Louisiana, Pennsylvania, and South Carolina. Consider the following clause form a New York draft bill:

Any clause or provision of a policy of insurance insuring against loss or damage to property, which includes, but is not limited to, the loss of use and occupancy and business interruption, which allows the insurer to deny coverage based on a virus, bacterium, or other microorganisms that causes disease, illness, or physical distress or that is capable of causing disease illness, or physical distress shall be null and void.

In other words, if you have Business Interruption Insurance, you could easily be reimbursed even if the contract has a specific viral clause in place.

#8 – Other Forms of Corona Virus Relief

If you have been hit hard with the effects of COVID-19, its vital to use all of the avenues at your disposal. These avenues include:

  • Mortgage Relief – The CARES Act allows mortgage relief up to 180 days for those affected. This is the case for Federally backed mortgages. If you cannot make your mortgage payments due to COVID-19, then you definitely need to contact your bank. All you have to do is submit a request to the servicer – no further documentation is required.
  • Lease Relief – know your rights. Landlords cannot evict tenants during the present time (provided they have been granted forbearance) without giving 120 days of notice. The CARES Act forbids evictions in Federally backed housing (note that you must still pay your rent – you just have a longer time to do it and won’t have any penalties for late payment). Many states and local authorities have issues laws that prevent landlords from evicting tenants.
  • Unemployment Benefits – If the worst comes to worst and you do lose your job, then at least you will be fully entitled to jobseekers allowance. A $2 Trillion Bill enacted in late March allows those who are now unemployed due to Corona Virus to gain the necessary funds to meet basic needs. The Pandemic Unemployment Assistance (‘PUA’) covers. Independent contractors and sick people caring for a loved one. The PAU also offers $600 on top of existing benefits for eligible applicants.
  • Friends and Family – There is increased solidarity among small communities and a willingness to help out. With a global pandemic, people are understanding and willing to lower costs and lend a hand. While not a direct form of finance, this is something that can be leveraged.

Capitalizing on the Corona Virus

The first instinct of the business owner (and people in general), when faced with a global pandemic, is to panic. But there is an abundance of ways to not only claim relief but to make a profit. Consider all of the examples given above – there is finance available to nearly everyone, even if the delays need to be taken into account.

There are many benefits to this virus, which may not be readily apparent at first. Employers will allow more people to work from home, given the necessity of working from home at present. New markets will open up. Other industries are booming – Amazon, Dominos, Burger King, and many other large chains are in the process of hiring more employees.

It has always been creativity that has propelled US businesses to the forefront of the global market. While the outlook has been quite gloomy, there is always a way to give customers what they want with innovative solutions.

Contractors and Digital Nomads

One contentious area surrounding the Corona Virus relief packages is that of independent contractors and gig workers. However, if your small business does fall underneath these categories of workers, you can still avail of upcoming relief. 

The Pandemic Unemployment Assistance Website will launch soon. This site will allow contractors, gig workers, and digital nomads to claim benefits. Little is known about this program as it is not currently operational. Applicants are advised to start preparing the documentation in advance.

This can provide up to 39 weeks of unemployment benefits and will be backdated to January 2020 or the first day you were unable to work. If you have tried other options and been rejected, this could be the way forward. Information needed to qualify for this benefit might include:

  • Copies of recent paycheck stubs.
  • Bank receipts showing deposits.
  • 1099s.
  • Billing notices provided to your customers.
  • Recent advertisements for your business or services.
  • Statements from recent customers.
  • Current business licenses, ledgers, contracts, invoices.
  • Building leases.

Online Lenders The Strongest Choice?

Online lenders are also processing certain government programs during COVID-19. The SBA Paycheck Protection Program can be accessed through both OnDeck, Smartbiz, and Kabbage.

If you have an existing loan with PayPal Loanbuilder, you can simply enroll in the PayPal Business Financing Merchant Assistance program. Thie allows a reprieve of 30 days where no withdrawals will be deducted from your existing loan. LoanBuilder also offers the  SBA Paycheck Protection Program. Other online providers are operating similar forgiveness programs for existing loans – you should be able to get a month’s reprieve. However, you might still need to contact them directly to discuss your options.

If the many relief programs available to you fail, then you can always gain access to funds from online lenders, one of the easiest ways of financial growth. For example, Kabbage offers the business line of credit up to $100,000 and the term loan up to $250,000. There is no credit score (though 540 is recommended). The only real requirements are $50,000 in annual revenue and 12 months in business. The application can be filled out online and you will get a response within 10 minutes, with funds supplied as soon as the next business day.

LoanBuilder, OnDeck, Lending Club, and SmartBiz provide similar functionality. While there is a lot of doom and gloom surrounding the Corona Virus, if business owners make the right applications, they are unlikely to fall short of the required funding. So many options are available right now and the people who remain calm and balanced will end up in a far better position if they play their cards right.

Corona Virus Financial Resources

To exhaust all of your options, we have made a comprehensive resource page of relevant information. There are many ways to protect your finances during a meltdown. 

Relevant sites that have important financial disclosures in relation to COVID include:

Summary of Financial Relief Strategies

As a small business order, make sure that you run through all of these financial tools, preferably in the order they are written below.

  1. SBA Paycheck Protection Program (‘PPP’)
  2. SBA Economic Injury Disaster Program (‘EIDL’)
  3. SBA Express Bridge Loan
  4. SBA Debt Relief
  5. Online Lending Options
  6. SBA Micro Loans
  7. Business Interruption Insurance
  8. Other Forms of Relief (Mortgage, Lease, Unemployment Benefits, Family, Friends).

Also keep an eye out for the Pandemic Unemployment Assistance program, which is aimed specifically to help out independent contractors and small business owners who do not qualify under the existing infrastructure. The program is not operational at the time of this writing, so check in periodically through this site.

Best Option for Cash Strapped Small Businesses

The truth is that there is a myriad number of ways to avoid the financial fallout from the Corona Virus. Relief is available in abundance. The main solution is just to stay calm and to submit applications to all of the relevant programs. There is a Federally mandated program to assist with every single demographic right now – including entrepreneurs and the self-employed.

Updated! While the PPP is currently operational, it ran out of funds from the 16th to the 27th of April. It’s best to look towards other forms of finance as a means of diversification. Online lenders such as Kabbage and OnDeck can provide US small business owners with funding as soon as the next business day. You can also submit the PPP application through these lenders, hitting two birds with one stone.

Remember, do your research – there has never before been so many financial programs in place from both government entities and online lending providers. 

Daniel Lewis
Daniel Lewis
Daniel Lewis is an MBA accredited investment professional who wants to assist small business owners to gain access to finance. After going through many channels for funding, Lewis has found that getting the first loan right is vitally important for future success.