Stimulus law directs $350B in support for small biz

Stimulus law directs $350B in support for small biz
Small Business Association of Michigan President Brian Calley

The historic $2 trillion federal economic stimulus bill signed into law Friday contains $350 billion in loans for small businesses that could transition into grants.

To seek a loan through a bank or credit union that lends through the U.S. Small Business Administration 7(a) program, companies need to average their monthly total payroll expenses for the last year. The SBA will provide loans of 250 percent of the monthly average.

Small businesses with fewer than 500 employees can use the loan to maintain their payroll, pay interest on debt that was outstanding before Feb. 15, 2020, and cover expenses such as rent and utility bills.

As long as a small business maintains payroll at “about the same amount” as last year in compensation, the SBA will forgive the loan, said Small Business Association of Michigan President Brian Calley.

“What will start out as a loan will be forgiven,” Calley said Friday in an SBAM daily briefing held shortly after the U.S. House passed and sent the CARES Act to President Trump, who quickly signed it into law.

Caveats in the bill include the SBA forgiving a maximum of $100,000 per employee and small businesses putting employees back on the payroll that they had laid off.

The loans for small businesses that were hit hard or forced to close because of the COVD-19 pandemic do not require personal guarantees or asset checks, or that a borrower first get turned down elsewhere for a loan, Calley said.

“This really is small business relief,” he said. “We’re optimistic and we’re thankful. Now we have to work out all of the details and make sure every single one of our businesses that wants to take advantage of this — which I think (is) most — gets connected to an SBA lender so that they can get the money sooner, rather than later, and get your team back together if you had to lay people off.”

In enacting the CARES Act, Congress looks to stimulate the economy once the COVID-19 crisis wanes.

Many small businesses have closed in Michigan under the state’s stay-home order. The relief the package provides can quicken the ability for small businesses to operate again after a period that’s been “economically devastating,” Calley said.

“This is a finite time period we’re dealing with. There will be an end to this crisis,” he said. “What they’re hoping for is businesses will be ready to hit the ground running, reopen and go as soon as it’s safe on the health care front to do that.”

Under the CARES Act, the SBA’s eligibility requirements for a loan essentially contain just two criteria: The small business was operating as of Feb. 15, and it had employees that were paid salary and payroll taxes during the period, according to SBAM CEO Rob Fowler.

Also on Friday, the Michigan Economic Development Corp. opened the application process for small business grants and loans supported through two $10 million relief funds created last week.

The MEDC will work through 15 local economic development agencies covering all 83 Michigan counties to disburse the funding. In West Michigan, that includes The Right Place Inc. in Grand Rapids,  Zeeland-based Lakeshore Advantage, and Southwest Michigan First in Kalamazoo.

The state relief funding is for small businesses with fewer than 50 employees.

“In this unprecedented time of economic and business stress, we want to do everything we can for West Michigan businesses that have been affected by the COVID-19 outbreak,” said Birgit Klohs, president and CEO of The Right Place. “We are collaborating with our local and regional partners in this effort to quickly and efficiently provide much needed financial support to small businesses.”

The Right Place received $1 million from the MEDC to administer across an 11-county region.

Small businesses affected by the state’s stay-home order can receive a $10,000 grant for working capital, payroll expenses, rent, mortgage payments, utility expenses, “or other similar expenses that occur in the ordinary course of business,” according to The Right Place.

“There are over 76,000 small businesses in these 11 counties and $1 million in funds,” Klohs said. “We anticipate demand will far exceed availability of funding, which will necessitate difficult decisions throughout the grant review process.”