The CARES Act will offer over $300 billion in relief for small businesses. The act includes both emergency grants and forgivable loan programs for companies with 500 or less employees. And there are additional adjustments around expenses and deduction rules that make it easier to keep employees and stay open in the near-term.
Small businesses can access much of that funding through the Small Business Administration (SBA), which won’t issue the loan, but will guarantee the loan to a private lender. Under the act, it is possible for the loan to be forgiven if it is used to cover payroll and/or debt incurred before the covered period (February 15, 2020). Qualified small businesses can have their loans deferred up to a year.
Under normal circumstances, banks have a reputation of being risk averse when it comes to lending. When there’s economic uncertainty, it would follow that it would be even more difficult for companies that they might deem “risky” to get a loan or line of credit. However, with a government backed guarantee, it is very likely that many qualifying small businesses will be eligible for loans up to $10 million.
One thing to consider is that the application and approval process will still take time. There are a few things you can do right now to make sure that you’re positioned to act quickly on your end.
Steps you can take to prepare to apply for a government backed loan
- Update your company information – You can use D‑U‑N‑S® Manager to make sure that your business credit file with Dun & Bradstreet has your most up-to-date business information. This can help lenders who use Dun & Bradstreet get a fuller picture of your business and show that you’re serious about getting funding.
- Payroll expenditures are protected, but there are some rules around what qualifies as a “payroll cost”
- Rent, mortgage, and utilities payments are acceptable uses
- Debt obligations incurred before the covered period are covered
Other alternatives
If your business would struggle to repay a loan, even with deferment, and your business expenses wouldn’t be covered by the act’s forgiveness section, consider the following:
- Reach out to your business partners and see if you can work out arrangements that could get you through the current situation and help keep you both in business. By opening the door to conversation, you may be able to find a mutually beneficial arrangement.
- Consider alternative forms of payment. Many of your customers may not be able to pay you in your usual method right now and exploring alternative forms of payment might help both of you.
- Reach out to your community. It’s entirely possible that others in your community are going through something similar. By supporting each other, you may be able to keep yourselves afloat.
- Within reason, expand your offering. Now is probably not the time for a large research and development effort, but you can start looking at alternative offerings that address the current market needs. As automobile manufacturers are using their factories to produce medical supplies and former waiters are delivering food, other companies are re-examining what they can produce and offer what is currently in demand
The most important thing to remember is that you’re not alone. We’re all in this together and business owners are some of the most passionate, resilient people I know. As Fred Rogers’ mother said, “Look for the helpers. You will always find people who are helping.” May we all help each other and get through this together.
Please visit our Small Business Resources section to find more tools and information to help small business owners weather this situation.
*CreditSignal only shows certain of your Dun & Bradstreet scores for 14 days, then provides directional changes to such scores. It also indicates the number of individual request(s) for information, which may include but is not limited to credit information, by a unique external customer(s) on a D‑U‑N‑S® Number. To view additional scores and ratings, view scores and ratings following the 14 day period, or learn about what industries are making such requests, we recommend that you upgrade to one of our paid credit monitoring or credit building solutions. Please note, due to the proprietary nature of these inquiries, we do not provide the names of the companies inquiring on your business credit file– only the industries in which they reside.
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