Ivey, local agency urges small business owners to apply for federal financial relief

In a statement Wednesday, Ivey advised owners to respond to the COVID-19 pandemic by taking steps to ensure their business will withstand the troubling economy, including applying for federal financial relief.

“This coronavirus has disrupted life as we know it, including the critical economic role played by Alabama small businesses,” Ivey said. “Only a few short weeks ago, our economy was the strongest it had been in the past 100 years due to the hard work and entrepreneurship of Alabama small business owners. We need our businesses up and running and back at full employment as soon as possible. I urge business owners to act today and be prepared to apply for assistance designed specifically to get them in front of the line when relief checks are written.”

The governor’s office sent along information from the U.S. Small Business Administration offering preliminary information related the Paycheck Protection Program, a component of the CARES act recently signed by President Donald Trump.

The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone:

» Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount, subject to a $10 million cap. For seasonal or new business, different applicable time periods will be required for calculation. Payroll costs will be capped at $100,000 annualized for each employee.

» The interest is 0.5% fixed rate and all payments are deferred for six months, although interest will accrue during this time period. The loan must be paid in full in two years, and there are no prepayment penalties or fees.

» Collateral or personal guarantee is not required.

» Business owners have until June 30, 2020, to restore full-time employment and salary levels for any changes made between Feb. 15 and April 26.

The loan amounts will be forgiven as long as:

» The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the eight-week period after the loan is made.

» Employee and compensation levels are maintained.

Business owners will owe money when the loan is due if they use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the eight weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. Owners will also owe money if they do not maintain staff and payroll.

Starting April 3, small businesses and sole proprietorships with 500 or fewer employees can apply for and receive loans to cover payroll and other certain expenses through existing SBA lenders. Starting April 10, independent contractors and self-employed individuals can apply as well.

Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries. For this program, the SBA’s affiliation standards are waived for small businesses in the hotel and food services industries, certain franchises in the SBA’s Franchise Directory, or that receive financial assistance from SBA-licensed small business investment companies. Additional guidance may be released as appropriate, according to the governor’s statement.

Other regulated lenders, including local banks, that choose to participate could facilitate these loans as well and be enrolled in the program. Owners can apply through any existing SBA lender or participating federally insured depository institution, federally insured credit union, and Farm Credit System institution. The deadline is June 30.

Dothan Area Chamber of Commerce President Matt Parker cautioned that there are still more regulations to be released for the PPP, but the best thing for local businesses to do at this time is to gather vital financial information while staying informed.

“The PPP program is very attractive because it helps maintain your employee base and there’s a forgivable portion to it,” he said. “Everyone needs to get their house in order, from a financial document standpoint, just make those preparations. That’s what we’re encouraging at this moment. Be ready to do something.”

The Alabama Small Business Development Center is hosting two webinars this week regarding the updated process for applying for the SBA Economic Injury Disaster Loan, the $10k forgivable advance, and the new PPP. Each webinar, hosted on asbcd.com, is limited to the first 1,000 participants.

Webinars will take place Thursday and Friday at 4 p.m.

The DACC has espoused dedication to helping the vast local small business community affected by the economic fallout of COVID-19 navigate the nuances of new legislation and will release information that could be pertinent locally on its webpage www.dothan.com/coronavirus-resources/. For more assistance, the chamber can be reached at (334) 792-5138.

Final guidelines for how the federal government will distribute financial relief to Alabama’s small businesses will be released soon. In the meantime, small business owners are encouraged to contact their local banker, accountant, financial advisor, or credit union soon to get the latest details about who is eligible, what documents are needed, and how best to apply for funding relief caused by the coronavirus.