Applying for a small business disaster loan? What to know about the COVID-19 stimulus package

On Wednesday, the Senate passed a historic $2 trillion economic stimulus package. Never has so much money been plucked from the coffers of the Fed and pumped into the veins of the American free market. And while big businesses are seeing a lot of the big bucks, many are wondering, what’s in it for the little guys?

Federal funds are vital for small businesses, which were—and will continue to be—hit hard by the coronavirus pandemic. Most already operated with razor-thin margins, so the COVID-19 economic disruption has plunged them deep underwater.

The stimulus bill’s primary item for small business aid is a $349 billion loan program: Under this “Paycheck Protection Program,” the Small Business Administration will distribute $349 billion to entities that apply and are approved.

If you’re looking to take part, here’s what you need to know:

Who can apply? Businesses and nonprofits with 500 or fewer employees are generally eligible for the loans. But the loans aren’t restricted to companies: Self-employed workers and gig workers, such as drivers for ride-share apps, also qualify. Qualified borrowers must have been in business before February 15, and must have paid employee salaries and payroll taxes or contractors.
How much? Businesses can receive loans up to $10 million at up to 4% interest rates, depending on how much they paid their employees between January 1 and February 29.
Who’s handling this? Loans will be provided through banks, credit unions, and other lenders, and will be guaranteed by the Small Business Administration. Loan applications should be submitted through lenders who are partnered with the Small Business Administration.
How long with it take? The loan process could become a same-day process as early as next week, in which case loans would be signed and disbursed within 24 hours.
What’s the catch? The program is called “Paycheck Protection Program” because it’s meant to ensure that businesses have the funds to pay their employees and to prevent layoffs. Loans offered through the program are forgivable, if used for their intended purpose: As long as a business receiving a loan maintains the average size of its workforce, it will only need to pay back the interest accrued, and the principal will effectively become a grant.

With the stimulus package having passed the Senate, the House is expected to vote on it tomorrow.

Update: Thursday, 4:30 p.m. ET:

The Main Street Alliance, a network of small business coalitions, released a statement, calling the stimulus package “a start on which we can improve,” and urging Congress to get started on the next one. “Small businesses simply will not take out loans to cover payroll with no revenue coming in, putting these loans at risk of not being eligible for forgiveness,” the group said. (Read the full statement here.)