SBA loans provided through the CARES Act are falling short; these local and organizational grants are filling in the gaps
The federal government's "fast and direct" financial aid for small businesses is proving to be anything but
This post has been updated.
As the global coronavirus pandemic rages on, more and more small businesses are finding themselves in need of bailouts to stay afloat. Governments and charitable organizations are working hard to supply this much-needed financial support, but as with most things accompanying this crisis, the funding situation is as complicated as it is dire.
what is the paycheck protection program?
On March 27, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, a $2 trillion economic relief package meant to provide “fast and direct” financial aid to American workers, small businesses and families adversely impacted by the pandemic, as well as preserve industry jobs.
Financial aid for small businesses specifically is being made available through the Paycheck Protection Program (PPP). An amount of $349 billion has been allocated to the PPP and funding will be dispensed as U.S. Small Business Administrations (SBA) loans through a network of banks and credit unions.
SBA PPP loans are intended to provide small business owners with the funds needed to cover up to eight weeks of payroll costs, employee benefits included. Awarded money can also be used to pay interest on mortgages, rent and utilities. PPP loans will be forgiven in full only if used specifically for these purposes, with at least 75% of the loan amount having been used for payroll.
Businesses impacted by the coronavirus that are eligible to apply for a PPP loan include the following:
- Any small business with an employee count of 500 or less, including 501(c)(3) non-profit organizations, 501(c)(19) veterans organizations, tribal business concerns (sec. 31(b)(2)(C) of the Small Business Act)
- Businesses with more than 500 employees are eligible in certain industries if they meet the SBA industry size standard
- Self-employed individuals
- Sole proprietorships
- Independent contractors
- Was in operation on February 15, 2020
Lenders started accepting applications on Friday April 3.
FEDERAL AID leaves out many small businesses in need
Concerns were quickly raised, however, about access to the program being limited to businesses with preexisting relationships with PPP approved banks. In addition to the SBA’s in-operation date requirement of February 15, 2020, Bank of America and Wells Fargo have only been accepting applications from borrowers who were customers by or prior to that date. A handful of other banks have imposed similar requirements.
We are a small biz and have a credit card account with Chase and a business checking/savings with Bank of America and according to both we don't qualify for PPP because checking and loan/credit aren't with one bank!? We've been customers since 2013. @SBAgov #CARESact #PPPloan— Joe Johnson (@jj_bstn) April 3, 2020
While PPP approved lenders have been provided interim guidance by the SBA to forgo section 120.150 of SBA lending criteria — which requires lenders to take into account things like a borrower’s reputation, creditworthiness, past earnings, ability to repay the loan and potential long-term success — banks are still for-profit entities and ultimately make business decisions to maximize the bottom line and minimize risk.
And as of today, the existing funds authorized by Congress have all been spoken for, leaving an overwhelming number of businesses unable to get the funds they require.
Congress has begun deliberating how to shore up the PPP, but negotiations are currently at a standstill. And though there are other financial relief efforts the SBA has put in place (with different terms), the budgets are much more limited:
- $2 million in low-interest Economic Injury Disaster Loans for small businesses and private, nonprofit organizations in certain states and territories
- Emergency grants of $10,000 to SBA Economic Injury Disaster Loan applicants (even if their loan application has been denied)
- Automatic debt relief payments on the principal, interest, and fees on current 7(a), 504, and microloans for a period of six months, as well as new 7(a), 504, and microloans issued by September 27, 2020.
- Automatic deferments through December 31, 2020 for SBA Serviced Disaster (Home and Business) Loans if a loan was in “regular servicing” status on March 21, 2020.
LOCAL AID becomes an even more critical part of the puzzle
To help fill in these funding gaps, state and local governments, as well as other organizations, are rallying to provide grant opportunities for coronavirus affected businesses.
Using money from its 1/4 cent economic development sales tax, Iowa’s Goshen County was able to provide grants in the amount of $1,000 to retail businesses in the county. The state also stepped in with $25,000 grants to small businesses through a $4 million disaster budget approved by the legislature.
In Kansas City, a coalition of charitable, business and government agencies created a relief fund with $5 million in grants for small businesses with less than 20 employees or businesses that make up to $2.5 million in revenue annually.
And as the crisis continues, more of these opportunities are being offered around the country.
funding from State and local governments
- Colorado — The Denver Small Business Emergency Relief program has a fund of $4 million and is awarding cash grants of up to $7,500 or microloans. Apply here.
- Kentucky — The Southeast Kentucky Downtown Business Stimulus Fund is offering grants of up to $3,000. The deadline for the first round of applications is April 17, 2020.
- Washington — With $5 million in funding, the Washington Small Business Emergency Grant program is offering grants for up to $10,000 (nonprofits excluded). Only select counties are still accepting applications. Grant applications are available for download here and should be emailed to the appropriate economic development organization in respective counties; addresses can be found here.
- California — The City of San Francisco, through the San Francisco Hardship Emergency Loan Program (SF HELP), is offering zero-interest loans. Loan inquiry forms can be found here. Mayor London Breed has also issued a moratorium on evictions for small and medium-sized businesses through April 17.
Through the Los Angeles Small Business Emergency Microloan Program, certain businesses can apply for loans ranging between $5,000 and $20,000. Apply here.
- Illinois — With a budget of $100 million, the Chicago Small Business Resiliency Fund is offering loans of up to $50,000. Apply here.
- Minnesota — Through the Minnesota Department of Employment and Economic Development (DEED), Minnesota has two loan programs available to small businesses. The Small Business Emergency Loan Program is offering zero-interest loans ranging between $2,500 to $35,000. Applications can be found here and should be sent directly to a certified lender from this list. The Minnesota Small Business Loan Guarantee Program will provide an 80% guarantee on loans of up to $200,000. Loans can be submitted to this email address.
- New Hampshire — The Manchester Small Business Recovery Loan Fund has $1 million in initial funding and is offering loans of up to $25,000. Applications are due by June 1, 2020.
- Pennsylvania — Through the COVID-19 Working Capital Access Program (CWCA), which is administered by the Pennsylvania Industrial Development Authority (PIDA), zero-interest loans (2% interest for agricultural businesses) of up to $100,000 are available. Apply for the loan through your county’s Certified Economic Development Organization.
- New Mexico — The New Mexico Recovery Fund is offering loan amounts based on 2019 operating expenses and will not exceed $10 million. Start the application process here.
Charitable grant opportunities
- Amazon Neighborhood Small Business Relief Fund — Amazon has allocated $5 million in cash grants to this fund for businesses in the South Lake Union and Regrade neighborhoods of Seattle, Washington, including businesses in buildings adjacent to the locations Amazon operates in the city of Bellevue. Check your eligibility here to start the application process.
- Facebook Small Business Grant Program — Through this program, Facebook is giving out $100 million in cash grants and advertisement credits to up to 30,000 businesses across 30 countries. Ureeka will be handling the application process for U.S. businesses. The application guide can be viewed here.
- Red Back Pack Fund — Presented by The Spanx by Sara Blakely, this fund of $5 million will provide 1,000 grants of $5,000 to female entrepreneurs. Each recipient will also receive a “lucky” red backpack as a symbol of “starting small while dreaming big.” Applications are accepted on a month-by-month basis. The application portal will open again on May 4, June 1, July 6, and August 3, 2020.
- American Farmland Trust’s (AFT) Farmer Relief Fund — Through this fund, the AFT will be providing cash grants of up to $1,000 to farmers. The deadline for the initial application round is April 23, 2020. For applications in English, apply here. En Español, aquí.
- Southern Smoke’s Emergency Relief Program — This nonprofit fund will be providing financial assistance to restaurant and bar owners, restaurant and bar employees and restaurant supplier employees facing unexpected expenses not covered by insurance. Apply here.
- National Endowment for the Arts (NEA) — The NEA will be awarding funds to nonprofit arts organizations. Only previous reward recipients from the past four years (FY 2017 to 2020) are eligible to apply. Learn about how to apply here. Applications are due by April 22, 2020.
- PetSmart Charities’ Emergency Relief Funding —Through its charity branch, PetSmart is providing aid to organizations working to help pets of people hospitalized or in quarantine as well as high-volume intake shelters with increased pet intakes. Send emails here to inquire about grant funding.