Much like the gold rush, struggling small businesses in Connecticut are expected to grab a federal lifeline in the form of a new $ 350 billion loan program that will begin accepting applications on Friday.
The centerpiece of the federal government’s plan to help small businesses hit by the coronavirus crisis is the Paycheck Protection Program, which was included in the massive CARES law enacted last month.
The program run by the Small Business Administration and its banking partners offers 1% interest loans – which could be forgiven – for businesses with 500 or fewer employees. The loans are also available for non-profit organizations, independent contractors and self-employed people.
Beginning Friday, Connecticut businesses will be able to take out loans totaling 250% of their average monthly payroll in 2019. If they spend at least 75% of that money to pay their workers, these businesses will be eligible for full remission. federal spending loans.
The application process for the program has been streamlined. TO apply for a loan in a participating bank, a business owner need only complete a two-page form and provide documentation. Loans are capped at $ 10 million.
Huge demand is expected for this program.
Eric Gjede, vice president of government affairs for the Connecticut Business & Industry Association, said his organization recently surveyed small businesses in the state about the impact of the coronavirus.
“Eighty percent of those surveyed said they expected lost sales,” he said.
The federal government has also launched smaller programs to help companies keep their employees during the crisis.
For example, the Economic Injury Disaster Loan program, also administered by the SBA, provides grants of $ 10,000 to help businesses, tenants and landlords located in areas affected by declared disasters, including Connecticut.
There is also a new ’employee retention tax credit’ for employers who are closed, partially closed, or experiencing significant loss of earnings due to the coronavirus. The credit, which is fully refundable, is equivalent to 50% of eligible salaries paid after March 12. But the maximum amount of eligible salaries taken into account for the credit is $ 10,000 per quarter.
Meanwhile, a new debt relief program allows borrowers who have taken out new loans to defer principal and interest payments for six months.
“Companies are looking at all of these programs and looking for anything that will keep them afloat,” Gjede said.
However, it’s the paycheck protection program that has garnered the most interest, and banks warn they may not be ready for the expected flood of applications because the Trump administration has failed them. provided the necessary guidelines. This could delay support for weeks or more.
“Banks are ready and willing to lend, but they need clear rules of conduct and a streamlined process to be able to get financing into the hands of small business owners in the coming days,” said Greg Baer, President and Chief Executive Officer of the Bank. Policy Institute, which represents the country’s largest lenders.
Gjede said that even some from Connecticut authorized banks To provide SBA guaranteed loans, don’t feel “up to it”.
Additional help for small businesses is expected in the next stimulus bill that Congress will consider.
Gjede says it’s necessary. “I hope there will be more because the demand in Connecticut is incredible,” he said.
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