Cash flow, payroll, and revenue shortages
A significant problem faced by contractors and other businesses across the U.S. during the pandemic is cash flow, payroll, and revenue shortages. Some companies are closing their doors because they do not have access to the capital that they need to continue operating their businesses. Having access to working capital is critical at this time, and companies should begin planning so that they will have money available when they need it.
The Coronavirus Aid, Relief, and Economic Security Act was passed by Congress and signed into law by the president on March 27. This law includes relief for small businesses that are dealing with economic harm because of the pandemic. Under the law, there are several types of assistance available to companies, including contractors.
The Paycheck Protection Program was created to encourage small businesses to keep their employees. It does this by offering a forgivable loan to companies that use the money for payroll, mortgage interest, rent, or utility for at least eight weeks. This program is an expansion of the Small Business Administration’s 7(a) loan program, and you can apply for it through any SBA 7(a) provider.
The Economic Injury Disaster Loan Advance program offers businesses that are facing temporary setbacks because of the coronavirus with loan advances of up to $10,000. Companies that are approved for this loan advance will not be required to repay it.
The SBA Express Disaster Bridge Loan program is a pilot program that allows eligible businesses to receive up to $25,000 in loan funds. Companies that have dire needs while they are waiting for their EIDL advance applications to be approved can apply for this loan. Then use the EIDL funds to repay a portion of the bridge loan. The companies will then need to pay the remaining balances of their bridge loans over a set term.
Finally, contractors that have existing SBA loans might benefit from the SBA Debt Relief program. Through this program, the SBA will pay the principal and interest of existing microloans, 7(a) loans, and 504 loans for six months. The agency will also pay the principal and interest for new loans that are issued before September 20, 2020. Businesses that had existing SBA disaster service loans as of March 1, 2020, can enjoy automatic payment deferrals until December 31, 2020. Interest will accrue on these loans during this period.