A Breakdown of COVID-19 Financial Aid
The coronavirus came into the U.S. with a vengeance, breaking down the economy and mimicking the impact of the Great Depression. While there are specific funds in place to help suffering small businesses through the pandemic, many U.S. companies received emergency government loans despite having months of cash on reserve. According to a report from Reuters, 41 publicly traded companies that received emergency aid already had enough to cover basic expenses for two months or more when they applied for the funds, while 30 had over three months worth of expenses stocked up.
To ensure businesses actually get the aid they need, Ratchet+Wrench breaks down where the funds are going and how to ensure you get what you need.
Where Is The Money Going?
During the pandemic, two stimulus packages were released before funding for small business owners became widely available. The third stimulus package, worth a record-breaking $2 trillion, followed by a fourth worth $484 billion, had allocated funds for small businesses. The third stimulus package, for example, helped cover most of the aid in the Paycheck Protection Program (PPP). To qualify for the program, small businesses needed 500 or fewer employees. And according to a report by the Observer, the PPP had a $10 million limit to each loan applicant. However, some borrowers were able to well exceed that cap by filing multiple applications across subsidiaries, as long as each operates as a separate legal entity and employs fewer than 500 people.
With all of that money up for grabs, many small businesses have not received any aid. Why? Part of the issue could be public companies, who have applied for a combined $870 million from the PPP, according to the the Observer. When small businesses that desperately needed the money found out, there was an outcry to return the money and a few companies did—Ruth’s Hospitality and Shake Shack, for example—but others have not, leaving many mom-and-pop shops without needed funds.
Is The Auto Industry Getting A Cut?
In an Automotive Service Association (ASA) webinar highlighting the stimulus programs, Ray Fisher, executive director at the ASA, shared how many industry members took advantage of these programs.
According to the data, roughly 90 percent of the industry applied for the PPP and roughly 55 percent applied for the Economic Injury Disaster Loan, with less than 4 percent not filing for any assistance at all, showing the majority of the industry need help in one way or another. But, are they getting the help they need?
As of April 22, less than half (40 percent) that applied had been approved for the PPP. 20 percent of those that approved received their funding roughly a week after the stimulus program became available. Overall, Fisher says the data shows a positive trend for the industry and how operators are taking advantage of the funds.
How Can You Get Your Money?
The money is in high demand and going quickly. Here are tips for how small business owners can ensure they get the funding they need.
Get Paperwork in Order
When it comes to getting the necessary paperwork to apply for loans, businesses should have a copy of their driver’s license or an official ID and have the business’s most recent IRS form showcasing the business’s payroll, like Form 941, 1099, or a 1040, for example. Business owners should also establish basic company and contact information, like a preferred phone number, email address, and preferred person to be contacted regarding financial matters.
Go with a Small Bank
Some business owners who bank with larger banks discovered upon applying for the PPP that they were either ineligible for the program or that they simply couldn’t get through fast enough to be in line for relief. If business owners want to decrease their chances of getting rejected, consider a smaller, local bank. Local banks may get back to you faster or have more relaxed eligibility requirements for customers.
Utilize the SBA Website
In addition to health and safety measures, the Small Business Administration (SBA) website is providing guidelines for companies seeking loan and funding assistance. Business owners can expect the site to be updated regularly as things evolve.