It’s finally here: Congress passed a new stimulus package (worth a whopping $2 trillion) that aims to help prop up the economy in the midst of the unprecedented COVID-19 crisis.
The package promises stimulus checks for individuals and families, more loans and grants for small business owners, extended time for unemployment health insurance (COBRA), and financial help for hospitals and medical centers.
But what does the stimulus package mean for you if you own a small business or are self-employed?
We break down what’s in the stimulus package that can help small businesses and the self-employed stay financially afloat over the next few months.
Increase in SBA loan funds + loan forgiveness.
The SBA is piloting a brand-new program — called the Paycheck Protection Program — which will provide $350 billion in funds to help small businesses stay in business without having to lay off employees.
The goal of the program is to prevent massive layoffs and skyrocking unemployment claims.
The funds can be used for up to twelve weeks of cash flow and payroll, as well as to cover expenses including rent or mortgage payments, utility payments, and more.
Business owners can apply for loans up to $10 million, with interest rates capped at up to 4%.
Note These loans turn into grants (meaning you don’t have to pay the principal amount of the loan back) if you keep your employees on the payroll. You’ll only have to pay back the balance on the interest rate amount.
The stimulus legislation includes processes to help expedite the loan approval process, meaning small businesses can get funds a lot faster than the average one-month waiting period.
In order to qualify for these funds, small business owners need to meet the following criteria:
Have fewer than 500 employees Keep employees on the payroll
Restaurant owners won’t be held to this criteria, as many of them have been forced to temporarily close as a result of state shutdown orders.
The $350 billion will be made available to local banks and credit unions to help expedite the loan application process. So if you want to apply for a Paycheck Protection Program loan, talk to the bank where your business account is located.
The legislation also seeks to waive the collateral requirement for certain types of loans.
Relief for self-employed workers and sole proprietors.
Normally, sole proprietors and independent contractors wouldn’t qualify for unemployment benefits; however, the stimulus package waives those requirements. That means if you’re considered self-employed, you may now qualify for unemployment benefits, including insurance coverage.
The stimulus plan extends all unemployment benefits to an additional 13 weeks.
Learn where to apply for your state’s unemployment benefits.
A 50% Refundable Payroll Tax Credit.
Another method Congress is using to encourage small businesses to retain their employees: a 50% refundable payroll tax credit.
This 50% credit is designed to offset the employer’s share of Social Security taxes (up to $10,000 per employee).
The bill also extends the deadline to submit payroll taxes, with the first half payable in December 2021, and the latter half due by December 2022.
Stimulus checks for individuals and families.
To top off these small business benefits, the stimulus package will provide individuals and families with a “stimulus check” of up to $1,200 per person (based on 2018 or 2019 income).
Want to see how much you may get? Check out The Washington Post’s handy stimulus check calculator.
This legislation aims to help small business owners manage these uncertain times. What do you think of the stimulus package? What other types of help do you think small businesses need?
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I love writing about the small business experience because I happen to be a small business owner - I've had a freelance copywriting business for over 10 years. In addition to that, I also head up the content strategy here at Simply Business. Reach out if you have a great idea for an article or just want to say hi!