DALLAS - Small businesses affected by the COVID-19 pandemic can soon begin applying for some of the money in the big stimulus package.
The government calls it the 'Paycheck Protection Program'.
This is a part of the $2 trillion stimulus package. There are incentives for small businesses to take one of the loans, but for some, it’s a heavy decision.
A poem taped to the door at BackMenders Chiropractic begins with the line, “History will remember when the world stopped,” and business has stopped at Chuck Kobdish’s office.
“I saw that just before I was leaving and I thought I’m going to put that out there,” he said.
He said, in Dallas County, chiropractors are only essential for emergency patients.
“The folks that are coming in once a month for the tune up are really not to be seen now,” he explained.
He decided to press pause on his business. It’s a decision that weighs heavy on him.
“My kids. I’m worried about my kids,” Kobdish explained.
He’s now looking to take advantage of the Small Business Administration’s Paycheck Protection Program.
“It is not a decision to be made lightly to sign on the dotted line and accept debt,” he explained.
The SBA said businesses can apply for up to $10 million at a .5 percent interest rate. It has to be repaid over two years.
“Again, they are looking for companies that are holding on to their employees. That’s the biggest part of this,” said Herbert Austin, with the Small Business Administration.
The program’s goal is to encourage businesses to keep their employees. If they do, there’s an incentive — payroll costs can be forgiven — which means businesses don’t have to pay that chunk of the loan back.
“And if you have a company, it’s going to be determined of how much payroll, how much of percentage is the payroll in the totality of your expenses,” Austin explained.
Businesses owners, initially, fill out a form with the SBA to make sure they qualify, but the loan will come from their bank, and it’s backed by the SBA.
“The SBA will guarantee 100 percent of these loans so the banks are taking no risk at all,” Austin added.
“It is frustrating that we’re closed down, yet at the same time, I do think it’s necessary to get past this, but how do we make up that gap? How do we bridge the gap in income that’s needed to stay open?” Kobdish said.
For business owners like Kobdish, where he’s the only employee in the company and there really isn’t a payroll, the SBA says 25 percent of the loan can be forgiven.
“We start to get 10-12 weeks into this, then I become really, really worried,” Kobdish added.
He said his situation could be much worse. The words of inspiration on his front door point to a hope, that when the pandemic is all said and done, we come out kinder than before.
“And having read that, that gave me a little bit of solace I’m closing up the doors,” he said.
The SBA also has a disaster loan, and a $10,000 grant is being attached if for small businesses that apply.
What can business owners use these loans for? You should use the proceeds from these loans on your:
- Payroll costs, including benefits;
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020.
What counts as payroll costs? Payroll costs include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
- State and local taxes assessed on compensation; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.