Governor Lamont’s advice to Connecticut residents may be to “Stay Safe, Stay Home”, but what does that mean for the state’s economy? With all non-essential workers under order to work from home, and with gatherings of more than five people prohibited until May 20, small businesses are feeling the strain – and with over 50% of all Connecticut workers employed by firms with a payroll of 500 or fewer, bad news for business is bad news for everyone.While it’s hard to find a silver lining to the COVID-19 crisis, there is, at least, recourse. On March 27, President Trump announced the rollout of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economy stimulus package that, among other things, provides low-interest loans to businesses struggling to meet payroll and operating expenses.
Of all the provisions of the scheme, the two with the greatest applicability to small businesses are the Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL). In addition to the federally organized assistance, Connecticut has introduced a state-specific program, Connecticut Recovery Bridge Loan Program, to provide emergency cash flow relief to Connecticut small businesses. For small business owners in Connecticut, the programs could be a lifeline.
Connecticut Recovery Bridge Loan Program
Administered directly by the DECD, the Connecticut Recovery Bridge Loan Program provides an immediate cash injection to small businesses in Connecticut with 100 or fewer employees. The program consists of zero-interest loans of up to $75,000 or three months of operating expenses, whichever is less. Loans are provided on 12-month terms, with a 6-month extension available on request. Applications should be made directly to the DECD.
The Economic Injury Disaster Loan (EIDL) program
Administered by the Small Business Administration (SBA), the Economic Injury Disaster Loan (EIDL) program provides qualifying entities with working capital loans of up to $2 million. Designed to support small businesses experiencing temporary revenue loss as a result of the pandemic (and more specifically, with fixed debts, payroll, accounts payable and other operating expenses that can’t be covered because of the disaster) the loans are available to entities that fall into the following categories:
- Small businesses employing fewer than 500 workers
- Small businesses, including agricultural cooperatives, aquaculture enterprises, nurseries, or producer cooperatives, with a payroll of 500+ who qualify as small under SBA Size Standards
- Sole proprietorships and independent contractors. with or without employees
- Private non-profits
- Tribal businesses
How to Apply for the Economic Injury Disaster Loan Program in Connecticut
The SBA acts as both the administrator and lender of the Economic Injury Disaster Loan Program. Applications can be made via the SBA online portal. Alternatively, you can print and complete the documents from the SBA website and mail them to SBA’s processing and disbursement center at 14925 Kingsport Rd., Fort Worth, Tex., 76155-2243, or make an in-person application at an SBA disaster center.
As part of the application, you’ll be asked to provide details of any income sources and unpaid taxes, personal assets, your most recent tax return, and the names and information for all proprietors, partners or stockholders with a 20 percent or more stake in the business.
Once the application has been filed, the SBA will review your credit and conduct an inspection of your losses. The agency aims to inform all applicants of their decision within 2-3 weeks; however, as The Washington Post notes, due to the overwhelming number of applicants, delays are to be expected.
The Small Print
Loans are available on terms of up to 30 years with an interest rate of 3.75% for small businesses and 2.75% for non-profits. There is no loan forgiveness program, and the first loan payment is payable one year after the loan origination date. Applicants may apply for an advance of up to $10,000 on the loan during the application process. The advance serves as a form of a grant, and does not need to be repaid with the rest of the loan. Advances are paid within 3 business days.
Paycheck Protection Program
The Paycheck Protection Program (PPP) aims to deliver immediate cash flow to businesses of 500 or fewer employees that are struggling to meet payroll expenses as a result of the disaster. Other entities eligible to apply include:
- Sole proprietors
- Independent contractors or self-employed persons
- Private non-profit organizations
- 501 veterans organizations
- Tribal businesses
- Businesses with 500+ employees who are classified as small according to SBA Size Standards
How to Apply for the Paycheck Protection Program in Connecticut
The Paycheck Protection Program is administered by the SBA, but loans are provided and applied for through an SBA 7(a) lender or any participating federally insured depository institution, federally insured credit union, or Farm Credit System institution.
A full list of eligible lenders in Connecticut can be found on the SBA website. Regardless of lender, all loans come with the same terms.
To apply, you will need to verify you meet the eligibility criteria for small businesses. The SBA has provided a PPP borrower application form that should be completed and handed to your chosen lender, along with any required supporting documentation.
The Small Print
Loans are available up to $10,000, with the maximum loan amount per business determined by length of operation and number of employees. As a general guideline, businesses in operation between February 15, 2019 – June 30, 2019, will be eligible to apply for a loan equal to 250 percent of the average monthly payroll expenses for that same period. Businesses that launched after June 30, 2019, will be eligible for a loan equal to 250 percent of the average monthly payroll expenses between January 1, 2020, and February 29, 2020. Loans can be forgiven if at least 75% of the amount is used for payroll costs (the remainder may be used for mortgage payments and interest, rent, and utilities), while payments can be deferred by up to 6 months.