Business Bankruptcies are on the rise in Minnesota
Small businesses have begun to seek financial relief as the pandemic continues. From the federal to state level, programs have been enacted to provide assistance. These programs aim to help small businesses struggling to pay operational expenses due to COVID-19. Several of the programs are offering this support in the form of reduced interest loans or grants.
Paycheck Protection Program
The CARES Act (Coronavirus Aid, Relief and Economic Security Act) includes many relief programs, with one of the largest sections being the Paycheck Protection Program. With $350 billion reserved for these government-supported loans, many small business classifications are eligible. Outlined below are those eligible to apply:
- Small businesses with fewer than 500 employees
- Select types of businesses with fewer than 1,500 employees
- These select types are determined by using the Table of Size Standards outlined by the Small Business Administration
- 501 (c)(3) non-profits with less than 500 employees
- Select 501 (c)(19) veteran organizations
- Self-employed, sole-proprietors, freelance workers, and gig economy workers, as long as they were operational on February 15, 2020
Loans taken under the qualifications of the Paycheck Protection Act can be up to 2.5 times the business’s monthly payroll but cannot exceed $10 million. This financial support is to be allocated to fund payroll, retain current employees, and pay mortgages, leases and utilities.
Coronavirus Preparedness and Response Supplemental Appropriations Act
All U.S. small business owners are eligible to apply for the Economic Injury Disaster loan outlined in this act. Signed into law on March 6, 2020, this act provides $7 billion to the Small Business Administration to aid small businesses who have lost revenue due to COVID-19. The interest rate for small businesses is 3.75%, and 2.75% for non-profits. If the business has other credit available however, they are not eligible.
Economic Industry Disaster Advance Loan
The Economic Injury Disaster Loan has a loan advance of up to $10,000, which will not need to be repaid and is made available within three days of a successful application. Applying small businesses must be able to prove they have experienced a loss in revenue due to the pandemic.
Minnesota Small Business Loan Programs
Minnesota also has its own Small Business Emergency Loan program. These loans range from $2,500 to $35,000, dependent on the determined need and financial instability of the borrower. The payment plan is set at five years with monthly payments, though the first payment is deferred six months. This program is still developing, and it is noted that partial forgiveness may be available. To be eligible for this program, the business must be based in Minnesota, a business type outlined in Executive Orders 20-04 and 20-08 and able to demonstrate how they have been impacted. As example, though not an exhaustive list, these business types are: restaurants, bars, theaters, museums, gyms, salons, amusement parks, and country clubs, among other businesses based in food and entertainment. Non-profits are not eligible for this loan program, nor are those able to qualify for a standard loan. Small businesses’ contributions to the Minnesota economy are not going unnoticed. This program hopes to support Minnesota businesses until we can all visit our favorite local shops and restaurants again.
Nationwide, consumers are trying to support small businesses in new ways. These loan programs aim to provide a stimulus to maintain operations during this uncharted economic time. To find more information on the outlined programs, visit sba.gov, uschamber.com and mn.gov/deed.