The new federal stimulus package that was recently passed represents an opportunity for small businesses to help get their organization out of financial difficulty. The stimulus bill currently provides $1200 checks to all citizens making below $75,000 a year and includes $350 billion in forgivable loans for small businesses.
With this in mind, it’s important as a small business owner to know where your business stands in terms of eligibility. This can help you not only determine the loan amount you should apply for, but also if this loan would help your business, or negatively impact it down the line. Read on for the strategies you and your business should take to get access to the stimulus package and how to allocate the resources provided.
Organize Financial Information
As a small business owner, your initial step in this process should be to organize your financial information. This will help you determine your needs and eligibility and will give you a reference point when proceeding with future steps. This is why it is vital to have both paper records of your businesses’ financial information and digital ones.
If you have an accountant or financial planner for your business, they should look into the businesses’ financial records and past tax forms to get a full overview of your financial information. It is vital that you stay engaged in this process, as you’ll want to make sure everything is in order before going forward with the next steps.
If you are a sole proprietor, or work a freelance gig, you’ll have to look through this information on your own, or with a financial planner experienced with solo entrepreneurship and freelance business management. To ensure your personal and business finances are dealt with separately, keep your personal income in a digital savings account, and your business profits in a business bank account. This will allow you to track your finances straight from your computer or mobile phone and will help you or your financial planner get through this process as smoothly as possible.
Determine Eligibility and Need
Once you’ve taken the time to organize your financial documents, it’s time to determine if you are eligible for the stimulus package, and if you would positively benefit from it. Keep in mind that not every business will need the stimulus package. If your business is operating smoothly with a remote team and maintaining payroll and operating expenses, you will not need to apply for this loan.
If however, you find that you’re going to need to lay off your workforce and won’t be able to cover day-to-day operations, this loan will provide you with the necessary support.
- Businesses are eligible for up to $2 million in loans
- Must employ less than 500 people
- The interest rate is 3.75% for small businesses and 2.75% for non-profits
- Loan is available until June 30th
- For more information on eligibility and types of loans and advances available, look to the Federal SBA website.
File Through Your Bank
If you’ve determined that you would benefit from this loan, you can apply through your local bank. You should first connect with the bank branch that you already have a working relationship with, for financing and business banking. Check-in with them and see if they’ve received information from the Federal Government on this.
Most banks should already have the information required to provide the loan, but if your current bank doesn’t have this information yet, or if you’re a new business without a working relationship with a bank yet, check in with other local banks that provide business loans.
As per the requirements of the stimulus package, this loan may be used only to pay for fixed costs of your business that can’t be paid because of the Coronavirus’s impact. For example, costs can include accounts payable, other bills, and most importantly, payroll. The major goal of this initiative is to keep as many people employed as possible. Following that, any extra funding should go to overhead costs and debts that need to be paid off.
At the end of the day, the loan is designed to help businesses stay afloat, and therefore, should not be used to purchase new equipment or investments for your business.
While this is a difficult time for many people and small businesses, and the future of the economy is uncertain, the new stimulus package for COVID-19 relief is the best way to keep operations running in your small business. Consider what you will need and focus on using this support to keep your employees on payroll, as this will be the most effective way to utilize this package.