7.5 million small businesses in the U.S. are at risk of closing permanently due to the coronavirus pandemic, CNBC reports. Small businesses employ almost half of the country’s workforce and are less protected from economic downturns. Fortunately, coronavirus relief funding is available, and recent government legislation passed to bolster the economy in the face of the pandemic now totals a record-breaking $2.5 trillion.
Payment Protection Program: 100% forgivable loans
After recently passing new stimulation legislation, congress has topped up the Payment Protection Program (PPP) with $310 billion (the previous $349 billion initially allocated to the program ran out in as little as two weeks). PPP is a loan that allows the self-employed and small business owners to continue to pay themselves and/or their employees for eight weeks. Borrowers can take out up to 2.5 times their average monthly income of last year (with a maximum of $100,000 per year). Interest rates are low, and these loans have the potential to be completely forgivable.
Economic Injury Disaster Loan
The Economic Injury Disaster Loan program (EIDL) is similar to the PPP in that it provides low-interest loans to the self-employed and small business owners. To qualify for the loan, the applicant must have experienced economic injury and be located in a presidentially-declared disaster zone — which is currently the entire U.S. since March 13th 2020. The SBA determines the exact amount of loan allocated to each business and bases the number on the extent of the economic injury. There’s a $2 million maximum. The EIDL is designed to cover six months of operational expenses, such as payroll, mortgages or rent.
Workers’ comp insurance
Most states already require business owners to invest in workers’ comp insurance. Worker’s comp for independent contractors provides financial protection in case injury happens on the job. For example, it covers expenses like initial and ongoing medical costs as well as wages lost during the recovery period. In the case of coronavirus, independent contractors and self-employed people can claim damages through workers’ comp — as long as they can prove they contracted the virus at work. However, this can end up being a challenge. Claims can be strengthened by other employees in the same workplace also contracting the virus.
The coronavirus pandemic is having massive financial ramifications for small business owners and self-employed people across the U.S. Coronavirus relief funding can help such individuals stay financially afloat during these uncertain times.