Everyone has been impacted by the Coronavirus pandemic. While eCommerce may have seemed like a recession-proof business, the current situation proves this is simply not the case. One way or another, you’ve seen changes to your operations. And, you’re going to see more in the coming months.
In an attempt to boost the economy during one of the greatest global emergencies in history, the US Federal Government passed a $2 trillion stimulus package. The plan is meant to help individuals and businesses get through this difficult time. As an eCommerce store owner, how will this legislation affect you?
Here, we will take a look at the following:
- A holistic summary of the US Stimulus of 2020
- Details about the small business sections of the plan
- How online stores can take advantage of new financial offerings
If you think this can help you navigate your current situation, read on.
First, What is the US Stimulus of 2020?
Despite how it seems to be one relief act for those affected by the pandemic, the US Stimulus refers to a series of legislation passed by the United States Congress in response to COVID-19. The Coronavirus Preparedness and Response Supplemental Appropriations Act, Families First Coronavirus Response Act, and CARES Act embody three phases of the federal government’s response to this catastrophe.
So, What is the Coronavirus Preparedness and Response Supplemental Appropriations Act?
Coronavirus Preparedness and Response Supplemental Appropriations Act or H.R.6074 is a bill that passed in the United States Congress on March 6, 2020, in response to the COVID-19 pandemic. The bill was introduced two days before it became law and was the first phase of relief.
Phase one included:
- Supplemental funds for specified emergency response organizations
- Exemptions from spending thresholds for certain emergency response organizations and departments
- Changes to FDA salaries & expenses
- Changes to the SBA’s Disaster Loans program
- Changes to the CDC, NIH, and other emergency response organizations’ funding, spending, and hiring processes
- Changes to bilateral economic assistance, which includes reimbursement for State Department and USAID spending
- Waivers for previously-existing telehealth restrictions for Medicare
And, What is the Families First Coronavirus Response Act?
Families First Coronavirus Response Act or H.R.6201 is a bill that passed in the United States Congress on March 18, 2020, in response to the COVID-19 pandemic. The bill was introduced seven days before it became law and was the second phase of relief.
Phase two included:
- Supplemental funding for nutrition programs like SNAP, WIC, and TEFAP
- Funding for states to distribute food to children that would be out of school for five or more consecutive days due to COVID-19
- Changes to nutritional programs to feed the elderly
- Changes to the Defense Health Program, Veteran’s Health Administration, and the Public Health and Social Services Emergency Fund to reimburse costs incurred for Coronavirus testing
- Stipulations for employers to allow paid sick leave for sick employees and parents to care for children during the Coronavirus outbreak
- Unemployment Insurance expansion
- Stipulations for health insurance companies to cover testing for COVID-19
- Tax credits for paid sick leave and family and medical leave
Next, What is the Coronavirus Aid, Relief, & Economic Security (CARES) Act?
CARES Act or S.3458 is a bill that was introduced in the United States Congress on March 19, 2020, in response to the COVID-19 pandemic. The bill has been referred to the Committee on Finance on March 21, 2020, and is expected to become law in the coming weeks.
Phase three will include:
- Authorization for emergency loans to distressed businesses
- Establishment and funding for forgivable bridge loans for small business
- Funding for grants and technical assistance for small business
- Funding for individual and family tax rebates ($1,200 per individual and $500 per child)
- Establishment of new limits for employers regarding paid leave
- Establishment of new retirement withdrawal, tax deadline, charitable deduction, and business interest rules for taxes
- Funding for prevention, diagnosis, and treatment of COVID-19
- Revises liability for healthcare volunteers, drug review procedures, and emergency medical diagnostic testing
- Suspends payment requirements for federal student loans
- Revises provisions to federal student grants and other student aid
Then, Take a Closer Look at the Small Business Sections of the US Stimulus Acts
First, let’s look at the changes to the SBA’s disaster loans program as defined in phase one of the stimulus. Then, we’ll look at the small business section of the CARES Act, which will have the greatest impact on your business.
So, What Changed With the SBA’s Disaster Loans Program When the Coronavirus Preparedness and Response Supplemental Appropriations Act Passed?
SBA Disaster Loans are a previously-available resource for small businesses, renters, and homeowners who have been impacted by declared disasters. The low-interest loans offered can help business owners cover operating expenses if insurance and FEMA funds do not cover everything you need to keep your doors open.
These loans can be used to cover the loss of the following:
- Real estate
- Personal property
- Economic injury
- Machinery and equipment
When the Coronavirus Preparedness and Response Supplemental Appropriation Act passed, the COVID-19 pandemic became a declared disaster. This means that any business affected by the virus would be eligible to apply for SBA disaster assistance.
A COVID-19 disaster loan or advance from the SBA could help you get the money you need to keep your operations moving. Obtain up to $10,000 for an Economic Disaster Injury Loan or up to $2,000,000 in the form of a working capital loan.
And, How Will the CARES Act Affect Small Businesses?
The CARES Act begins with a section dedicated to small businesses “interruption loans.” The scheme is meant to protect small businesses that are experiencing a loss of revenue due to the COVID-19 pandemic. The intention is to keep workers paid in this time of crisis.
The CARES Act’s Small Business Interruption Loans section covers the following.
- 7(a) loans program
- Entrepreneurial development
- Waiver of matching funds under the women’s business center program
- Loan forgiveness
- Direct appropriations
- Minority business development agency
- Waiver of prepayment penalties
Under these categories, the legislation lays out new rules in favor of businesses in need of assistance right now.
What is an Interruption Loan Under the CARES Act?
Under the CARES Act, an interruption loan is guaranteed by the government, will incur no fees, has a maximum amount of $10,000,000, and can be used to pay for essential business costs.
- Payroll support
- Employee salaries
- Mortgage payments
- Other debt obligations incurred before the loan term
Employers who were in operation on March 1, 2020 may be eligible to apply. As an eCommerce store owner, if you have less than 500 paid employees and you’ve experienced any of the following, you may be able to access funding.
- Supply chain disruptions
- Staffing challenges
- A decrease in sales or customers
- Shuttered businesses
Furthermore, low-interest, federally-guaranteed loans are typically easier to qualify for than traditional business loans.
What Grants May Be Available Under the CARES Act?
While some economic development grants are directly available to businesses in regions that have been impacted by disaster, that doesn’t seem to be what we’re looking at with this legislation. Instead, the proposed grants will be dispersed to select SBA partners. However, this doesn’t mean that you won’t benefit from the grants that could be dispersed.
These proposed grants are expected to be used for the education, training, and advising of small businesses that have been impacted. And, the end-beneficiaries (small businesses) should gain access to the following.
- Resources that enable companies to raise capital and build business resiliency
- Education about the hazards, transmission, and communication of COVID-19
- Education about and mitigation of the direct business impacts of COVID-19
- Education and resources to enable telework and remote customer service to reduce transmission of COVID-19
- Education about and mitigation of cyber threats to telework and remote customer service environments
- Mitigation of excessive business-related travel and outside activities to reduce the transmission of COVID-19
- Other relevant education, resources to mitigate the transmission of COVID-19
80% of these grant funds will go to Small Business Development Centers and 20% to Women’s Business Centers. Furthermore, all funds matching that was previously required under similar programs will be waived.
Which SBA Loans Might Be Forgiven?
Now, here’s where you can actually leverage “free” money. The new loans guaranteed under this bill are structured similar to a student loan where payments can be deferred. This means that you won’t have to pay on the loans for up to one year (though the SBA says six months). And, there will be an opportunity to have at least part of your loan(s) forgiven.
What portion of loans may be forgiven?
- Costs of maintaining payroll between March 1, 2020 and June 30, 2020 in the amount of up to $33,333 per individual
- Costs of qualified sick leave and family leave for wages covered under the Families First Coronavirus Response Act
So, if you take out a guaranteed loan to pay your employees, you can later apply to have the loan forgiven. You must spend at least 75% of the loan on payroll to qualify for forgiveness.
How can you take action and use these new resources to keep your operations running?
Now, Learn how to Leverage Newly-Available Aid to Get Your eCommerce Business Through the Storm
Now, it’s time for the meat and potatoes. If your online store has experienced a loss due to COVID-19 or you anticipate that it may in the near future, here’s what you can do to stay ahead of the game.
1. Apply for a COVID-19 Economic Injury Disaster Loan
To qualify for relief under the SBA guidelines, you must be a small business or nonprofit with under 500 employees that has experienced a loss due to the virus. Some businesses that have more than 500 employees may still qualify under the size-standards guidelines. If you have more than 500 people employed with your company, use the Size Standards Tool to find out if you qualify.
Note: Renters and homeowners may also qualify for some form of low-interest financing through this program.
2. Apply for the Paycheck Protection Program (Interruption Loan)
With an SBA Small Business Interruption loan under the paycheck protection program, you may be able to access the funds you need to keep your staff paid and your online store open. And, if the funds are used for payroll, interest on mortgages, rent, or utilities, you can have a portion of your loan forgiven.
Small businesses with less than 500 employees, sole proprietorships, independent contractors, self-employed persons, and non-profit organizations can apply.
3. Seek Help From SBA Partners Who Will Receive Grants
An indirect perk for online stores of the Education, Training, and Advising grants section of the CARES Act is that you may have access to business development resources that were previously underfunded. So, now you can potentially access free or low-cost business services that could be profoundly valuable right now.
Women’s Business Centers offer guidance and resources for women-owned small businesses in the United States.
Minority Business Development Agency is dedicated to helping minority-owned small businesses in the United States obtain education, resources, and funding.
The SBA Learning Center is certain to add more Coronavirus and recovery-related educational resources to their knowledge base in the coming months.
Depending on your current situation, now might be a time to focus more on employee and customer retention rather than growth. And, if you can get the funding you need to stay capitalized, you are more likely to be ready for business when the situation improves. Use the resources above to help you stay afloat during this time.
Ashley Kimler is an eCommerce specialist who has been selling online and helping both small businesses and enterprise companies with their online sales marketing for nearly 15 years. Follow @gorgiasio and @ashleykimler on Twitter to read more expert advice.
This article originally appeared in the Gorgias blog and has been published here with permission.