The safety measures required by the coronavirus pandemic have had a huge impact on small businesses in Massachusetts. Many have been forced to close or are dealing with a major decline in revenue. If your small business has suffered during this crisis, you may want to consider taking the following steps:
Guide Assisting Small Businesses Recovering from the COVID-19 Crisis
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Look for Grants and Loans
There is a range of grant and loan programs for small businesses impacted by the coronavirus shutdown. Many of these are federal programs, and others are offered by private non-profits, corporations or other entities. Even if current funding for a program has been exhausted, additional monies may become available. Loan and debt relief programs to consider include:
SBA COVID-19 Related Programs
Economic Injury Disaster Loan: An Economic Injury Disaster Loan (EIDL) can provide up to $2 million to small businesses impacted by the coronavirus shutdown. Principal and interest payments on the EIDL can be deferred for the first year. The deadline to apply for an EIDL loan is currently December 31, 2021. You can access more information about the coronavirus-related EIDL here.
Paycheck Protection Program (PPP): The PPP, which closed to new applicants on May 31, 2021 provided a short-term loan to cover certain payroll costs, mortgage interest, rent, and utilities. The maximum loan amount was generally 2.5 times the average of your last 12 months of certain payroll costs, up to $10 million. Payroll costs were capped at $100,000 per employee. The interest rate on already distributed loans is 1%. These loans were originally due in two years, but subsequent legislation amending the PPP extended the loan term for loans made on or after June 5, 2020 to five years. However, payments are deferred for 10 months or until the date on which the loan forgiveness amount (if the loan is only partially forgiven) is remitted to the lending bank by the SBA. With some exceptions, this loan is eligible to be forgiven entirely if:
- the loan proceeds are spent during the 8 to 24-week period immediately after the loan is funded;
- at least 60% is spent on payroll; and
- no more than 40% is spent on rent, mortgage interest, and utilities.
There are other restrictions, including limitations on the amount forgiven if you reduce salaries and/or the headcount of employees between the time the loan is issued and December 31, 2020 (or, for a PPP loan made after December 27, 2020, before the last day of the covered period), and you do not rehire those employees by December 31, 2020 or the last day of the covered period for a PPP loan made after December 27, 2020.
Further details about PPP loans and forgiveness are available here.
If you have questions about the PPP, Massachusetts Growth Capital Corporation (MGCC) has compiled a list of organizations and contact information for individuals at those organizations helping businesses through the process of PPP called the COVID-19 Small Business Stabilization Network.
Employers with questions about PPP and unemployment benefits can find more information here.
Shuttered Venue Operator's Grant (SVOG): The SVOG was established by Congress to provide over $16 billion in grants to shuttered venues. Depending on when an entity started operating, they may be eligible for grants equal to 45% of their 2019 gross earned revenue or $10 million, whichever is less. Eligible entities for an SVOG include live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators or owners, and talent representatives. The funds may be used to cover expenses such as payroll costs, rent payments, utility payments. Your entity needs to have been in operation as of February 29, 2020 to qualify. Further details on eligibility requirements, allowable uses of fund and how to apply are available here.
Other SBA Programs
Pre-coronavirus SBA loan programs: In addition to special programs dedicated to assisting small businesses during the pandemic, the SBA also offers several preexisting types of loans to support small businesses. Because these loan programs are not designed to meet the current emergency, some of their prerequisites and eligibility requirements can be more onerous than the pandemic specific programs. Nevertheless, small businesses may wish to consider applying for loans through those programs, which include, among others:
- 7(a) Loans: These are loans for general business purposes and could be made to your business directly by the SBA, issued as a participation between the SBA and an SBA lender, or privately initiated and serviced but guaranteed in part by the SBA. Information about 7(a) loans can be found here.
- SBA Microloans: Under the SBA’s microlending program, the SBA makes loans and provides loan guarantees to non-profit intermediaries that in turn issue short-term loans of up to $50,000 to eligible small businesses. The loans can be used for most general business purposes (not to pay personal debts). In addition to the loan, your small business can benefit from management assistance and counseling that the intermediaries can provide. To apply for an SBA microloan, contact one of the lenders listed here.
- 504 Loans: Projects involving 504 loans require long-term fixed-asset financing for small businesses. A certified development company provides the final portion of this financing with a 504 loan made from the proceeds of a debenture issued by the certified development company, guaranteed 100% by SBA, and sold to investors. A list of certified development companies can be found here.
SBA Debt Relief: The SBA will pay the principal, interest, and fees of current SBA 7(a), 504, and microloans for a period of up to six months. The SBA will also pay the principal, interest, and fees of new 7(a), 504, and microloans issued before September 27, 2020. More information is available here.
Local and State Based Private Grant and Loan Programs: Various organizations are creating programs to help small businesses and others. You should consider applying to programs that fit the profile of your business and your business needs. For instance, the Massachusetts Growth Capital Corporation (MGCC) will be administering funds from the Community Development Block Grant COVID-19 Program to 23 municipalities to provide microenterprise assistance up to $10,000. The City of Boston has created a $6 million Reopen Boston Fund to help small businesses with the costs of implementing public health guidance requirements; the Fund provides grants up to $2,000 and reviews applications on a rolling basis according to the state’s phased reopening plan. In addition, the City of Chicopee has established the Emergency Response Grant Program that offers grants up to $10,000; and the City of Framingham has established the COVID-19 Emergency Small Business Grant Program that offers grants up to $10,000. Similarly, the Cape Cod Resilience Fund is accepting applications on a rolling basis for grants up to $2,000 for eligible businesses.
Employee Retention Tax Credit: The IRS will give a tax credit to eligible businesses that continue to employ their workers. The credit is applied against the Social Security payroll tax. For wages paid after March 12, 2020 and before January 1, 2021, the credit is equal to 50% of qualified wages paid during the time period and is capped at $5000 per employee. For wages paid after January 1, 2021, the credit is equal to 70% of qualified wages paid and is capped at $7000 per employee. If the credit exceeds the Social Security portion of the payroll tax, the excess amount can be paid to the business directly. The credit is not available on salaries paid to business owners or their relatives and the same wages claimed under the credit cannot be used to qualify for PPP loan forgiveness. More information is available here. There are also other tax credits available related to the pandemic, such as a payroll tax credit on paid sick leave and expanded childcare leave.
Additional Private Market Bank Loans: You may also be able to obtain a regular additional business loan to bridge your current financial needs. Local lenders have indicated they are available to work with business borrowers.
Crowdfunding: You may also want to consider using a crowdfunding site to obtain additional money for your business. These sites allow you to raise money from investors or contributors with certain limitations as to the size of the overall investment. You should carefully consider whether this type of investment is what you need; crowdfunding can come with many obligations for small businesses and is in many ways more complicated for you than a traditional loan.
If you apply for a grant or loan, you will need to provide financial and/or personal information, so beware of scams. Make sure you are on the real government or bank website when applying by following these simple steps. Finally, you should confirm that any non-profit claiming to operate in Massachusetts is legitimate. For instance, you can check if a charitable organization is registered and in compliance with the Attorney General’s Office annual filing requirements.
Report Your Experiences and any Unfair Practices You Encounter to the Attorney General
The Massachusetts Consumer Protection Act protects you from unfair or deceptive business practices. If you have encountered difficulties with landlords, mortgagees, creditors, debt collectors, suppliers, insurers, or other businesses you deal with, we want to know about it. We are also interested in hearing about your general experiences and what you have done to keep your business operational during the shutdown. Please provide us with your information on the Small Business Experience form.
Free Legal Assistance for Small Businesses
You can also receive help from the COVID Relief Coalition, a group of Massachusetts non-profits, law firms, and governmental agencies of which the Attorney General’s Office is a part. The Coalition helps small businesses and non-profit entities in the greater Boston area with one-on-one advice about access to emergency loans and other sources of relief. The Coalition will also provide you with free pro bono legal advice from an attorney and should respond to your request for help within 24 hours. Complete a form at this link to receive this service.