It’s hard to imagine a bigger financial disruption for our state’s businesses than we are seeing right now. Between federal and state orders to stay at home because of the COVID-19 health threat and a global glut of oil happening at the same time demand is dropping, leading to VERY low oil prices, nearly every sector of Louisiana’s economy is being beaten up pretty badly.
As a business owner, especially if you have a small business (which the federal Small Business Administration defines as a business with fewer than 500 employees), what can you possibly do to take care of your employees and keep your enterprise ongoing?
Federal Relief Funding
The federal government is taking all of these threats VERY seriously. Congress has passed several bills in the past couple of weeks to inject money directly into small businesses, and to make emergency funding available for folks who have been furloughed from their jobs because of this crisis.
The most amazing to me is something called the Paycheck Protection Program (PPP), which is part of the recently passed CARES Act. In this program, the federal government has set aside $349 BILLION to help small businesses continue to make payroll right now.
To put this funding in context, imagine the entire United States global defense budget for a year. That covers Army, Navy, Air Force, Marines, everything. The $349 billion allocated in the PPP represents about HALF of what the federal government puts toward the entire defense budget. Big money.
The process for businesses to apply for this money is VERY simple. I’ve seen the app; it was only two pages long.
This new program for relief funding is administered through the U.S. Small Business Administration’s loan program. Under it, businesses can borrow up to 2.5 times their monthly total payroll expenses (including health insurance costs for their employees).
Then, if they spend at least 75% of the loan money on payroll, and the rest on things like mortgage interest, rent or utilities, the federal government has a process to convert the entire amount the small business received under the program TO A GRANT. That means the small businesses don’t even have to pay it back, like they would with a loan.
Move quickly! The program opened officially for applicants on April 3. The application and more details can be found here.
Assistance Available in Louisiana
Louisiana also is moving quickly to help small businesses keep their cash flowing and their enterprise moving forward. Louisiana businesses that employ fewer than 100 workers are eligible for a new loan program to help them through the COVID-19 crisis, called the Louisiana Loan Portfolio Guarantee Program.
This program allows small businesses to take out very low-interest loans up to $100,000, with no payments for at least the first six months and terms up to five years. The Louisiana Economic Development department has provided a guaranty fund for this program, and financial institutions that are members of the Louisiana Bankers Association will provide the loans. This program is starting with a pool of $50 million, which state officials expect to be disbursed very quickly across Louisiana.
Employers can use these loans to meet payroll, retain employees or pay rent, mortgages and other expenses. Here are the details and how to apply.
I know that for business owners, it’s going to be very tempting to feel despair with the double-whammy we are all getting hit with right now. A depressed oil market and the COVID-19 crisis happening at the same time is a hard economic hit.
Help for Employees
From the employee perspective, Louisiana is in the process of entering into a new agreement on unemployment benefits with the federal government, which will GREATLY enhance unemployment benefits in Louisiana. Those negotiations are ongoing, but the federal government already has approved money that could quadruple the amount of normal state unemployment payments. It also extends the length of time you can receive those benefits through July 2020.
In the meantime, visit the Louisiana Workforce Commission’s website if you need information on how to apply for unemployment benefits.
Overall, it’s clear our federal and state governments are working very hard to keep people employed and, more importantly, to keep their health benefits in place. This also eases the burden of worrying about how to keep payroll going, at a time when we all have enough to worry about.
Straight Talk is, help is on the way. Apply, take advantage of offers of help in these extraordinary times, and set yourself up for a strong recovery in the next few months.