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Coronavirus Brings Financial Assistance to Small Businesses

Author: Jose L. Espejo, Natasha M. Nazareth Date: 03/27/2020

Categories: Business Startups, Corporate and Business Law, Covid-19 News and Resources

Image of a small business loan application As our governments on the federal, state and local levels respond to the COVID-19 pandemic, the small businesses at the heart of the economy are quickly feeling the impact of each new restrictive measure designed to “flatten the curve.” Fortunately, new relief programs for small businesses are rolling out at every level of government. We have summarized key programs in the DC metro area as of March 25, 2020. 

According to the Small Business Administration, 47.5% of Americans work for small businesses, which the SBA defines as businesses employing up to 500 people. Most business relief programs target this 500-employee ceiling, but some programs further target businesses with less than 50 employees and not-for-profit organizations. 

As your business identifies programs, keep an eye on other requirements, which may include revenue ceilings, specific industries or industry verticals, and geographic location. Most applications are available online and many guarantee a response within a fixed timeframe. 

Business owners should weigh financial features of each program in context with the company’s existing cash on hand, potential revenue scenarios (we recommend best, worst and most likely), reserving “jump-start” funding, and a thorough picture of expenses and liabilities. 

Look carefully at whether relief funds are a loan or grant, the interest rate, what purposes the money can be used for, and whether there is any forgiveness for certain kinds of expenditures. 

Finally, consider whether the business qualifies for more than one type of relief, whether the programs can be “stacked” and if there is a cap on the total amount of funds received. 

Relief Programs Across the DMV  

The entire state of Maryland, the District of Columbia and the counties of Accomack, Alexandria (City), Arlington, Fairfax and Loudoun in Virginia have been declared “disaster” areas by the U.S. Small Business Administration (“SBA”). These areas are eligible for the SBA’s Economic Injury Disaster Loan Program. The program provides targeted, low-interest working capital loans to small businesses and non-profits that have been impacted by COVID-19.  SBA provides small businesses working capital loans of up to $2 million. The interest rate is 3.75% for small business and 2.75% for non-profit organizations. SBA provides long-term repayment options for eligible small businesses. 

Programs in Washington, DC 

With the COVID-19 Response Emergency Amendment Act of 2020, the D.C. Small Business Recovery Microgrant Program will offer grants to small, local businesses, individual contractors, self-employed individuals, and non-profits to meet their short-term financial needs.  The grant may cover employee wages and benefits (including fringe benefits associated with employment, such as health insurance), accounts payable, fixed costs, inventory, rent, and utilities.  

Programs for the State of Maryland 

Maryland has created the COVID-19 Layoff Aversion Fund which helps businesses impacted by COVID-19 by preventing or minimizing the duration of unemployment resulting from layoffs. This would award applicants up to $50,000 to meet specific needs of the business to minimize layoffs. 

For Maryland-based businesses with under 50 full- and part-time employees or Maryland manufacturers: 

  • The Maryland Small Business COVID-19 Emergency Relief Loan Fund offers for-profit businesses a loan with no interest or principal payments due for the first 12 months, then the principal converts to a 36-month term loan of principal and interest payments, with an interest rate of 2% per annum. 
  • The Maryland Small Business COVID-19 Emergency Relief Grant Fund offers businesses and non-profits an outright grant with amounts up to $10,000, not to exceed 3 months of demonstrated cash operating expenses for the first quarter of 2020. 
  • The Maryland COVID-19 Emergency Relief Manufacturing Fund supports Maryland manufacturers to produce personal protective equipment (PPE) that are desperately needed in by hospitals and health-care workers. 

Montgomery County, Maryland Considers Relief Package 

Stay tuned for a $20 million bill being expedited by the County Council.  Grants of up to $75,000 are expected for small business relief. Other provisions, which include assistance for food, rent and other necessities, will be of interest as well as many businesses are cutting salaries across the board as an alternative to layoffs. 

We are monitoring business relief programs as they are enacted and become available. Please feel free to contact Natasha M. Nazareth at nnazareth@mcmillanmetro.com or Jose Espejo at jespejo@mcmillanmetro.com with any questions about business relief or other options for your business to survive and thrive through the Coronavirus crisis.