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COVID-19: Things That Actually Help Your Centers and Schools

During the Great Recession years of 2008 and 2009 many of our childcare centers, preschools, Montessori Schools and private elementary schools closed and never reopened. Many places closed permanently because we didn't move quickly enough. Below you will see sources of money/liquidity for your centers and schools. Use these options where it benefits you. See the bottom of this article for free resources to help you improve the other side of your financial equation. We're going to get through the COVID-19 crises...just like every other crisis before.

SBA LOAN PROGRAMS AVAILABLE

Available SBA Programs

  • Economic Injury Disaster Loans (EDL), some information below
  • SBA Payroll Protection Program (PPP) under the CARES Act, covered next
  • SBA Express Bridge Loan (EBL)
  • SBA Regular 7(a) Loan Program


PAYCHECK PROTECTION PROGRAM

The Paycheck Protection Program will provied nearly $350 billion in loans and loan guarantees for the covered period of February 15, 2020 through June 30, 2020. Note that the use of PPP eliminates the use of SBA Economic Injury Disaster Loan (EIDL).

  • It will cover payroll costs (up to annual amounts of $100,000 per employee); continuation of group health care benefits; employee salaries; commisions or similar compensation; mortgage payments; rent; utilities; and interest on any other debt obligations incurred before the covered period.
  • It will extend eligibility to companies of 500 employees or less and 501(c)(3) nonprofits, veteran's organizations, and tribal small business concerns.
  • Sole-proprietors, independent contractors, and other self-employed individuals may also participate.
  • Loan forgiveness is available up to the principal amount of the financing.
  • Loan forgiveness would be reduced for employers who lay off workers or reduce employee compensation except where employers rehire workers or pay additional wages to tipped workers.
  • Loan forgiveness is available for payroll costs, mortgage interest, rent and utility payments.
  • Forgiven loan amounts will not be included as a gross income.

The general formula is the lesser of the average total monthly payments for payroll costs during the one year before the date the loan is made, multiplied by 2.5; or $10 million.


ECONOMIC INJURY DISASTER LOAN

  • 4.5 trillion in loans to businesses, states, cities that can't get financed through other means.
  • Expansion of the ways the Small Business Administration (SBA) can help small businesses, including allowing qualified SBA lenders to loan money directly to eligible customers, but there will be limited funding. Now is the time to call your qualified SBA lender and begin the process of gathering financial and tax records.
  • The loans are available to small businesses, small agricultural cooperatives, small aquaculture businesses, and most private nonprofits. The loans come directly through the SBA, not through banks.
  • The loans offer working capital loans for payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.
  • Applicants need to show they have suffered working capital losses due to the coronavirus disaster.
  • The SBA will do an internal test to determine eligibility, so applicants do not need to produce any bank documentation for their application.
  • 95% of the loans previously issued have been for $500,000 or less but can go up to $2 million. The SBA will determine the loan amount.
    • Loans up to $2 million are to be repaid over 30 years at 3.75% fixed rate; payments deferred over the first 12 months.
    • Must be small business per SBA size standards.
    • Loans > $25,000 require collateral.


HOW TO APPLY:

Economic Injury Disaster Loans
https://disasterloan.sba.gov/ela/Information/EIDLLoans or https://www.sba.gov/funding-programs/disaster-assistance

Below are the high points on the Stimulus Loans/Grants only (Who, What, When, Where and How). This is a fluid situation and these facts will change. Always review the latest information as it becomes available from other trustworthy sources.

  • WHO is eligible: Businesses with less than 500 employees. Multi-location restaurants with more than 500 employees, but no single location with more than 500 employees will be eligible.
  • WHAT Loan Amount: 2.5 times your average monthly payroll costs limited to $10 million. 10-year loan with an interest rate of 4.0% or lower. No prepayment penalties. (Further definition of payroll costs will be defined, but 1099 contractors are included in the calculation). Loan forgiveness is included: the amount of the loan used to pay for payroll, rent, utilities, and mortgage interest from February 15, 2020 through June 30, 2020, will be forgiven.
  • WHEN: Mnuchin said in a press conference that these loans should be available Friday, April 3, 2020.
  • WHERE: Any participating FDIC insurance bank or federally insured credit union will be able to provide these loans. These loans will be SBA loans, but you do not need to go through an SBA bank or the SBA website to access these loans.
  • HOW: We don't know what documentation will be required precisely, but be prepared to have your payroll tax returns and payroll reports from 2019 and YTD 2020 available to calculate your eligibility and the amount of the loan.

Additionally, there is no personal guarantee required on any of the loans. They are 100% insured by the Federal Government.

The options above focus on providing your centers and schools with incoming cash. Note that incoming cash does not mean earned revenue. For additional income options and techniques for managing costs (the other side of the equation) see the many FREE resources at www.bfsinc.net. These resources can also help you to retain your teachers and other staff members until we can get to the other side of COVID-19.

Best to you and yours...Stay safe.

(Legal disclaimer: Always consult the proper professionals before taking action. By and before the use of the information provided herein, reader agrees that BFS®is not responsible for viewer's actions related to said information.)