COVID-19 has brought all but essential businesses to a halt. Although, many would argue against this, barbershops have not been deemed essential. Congress passed the CARES Act intended to assist independent contractors, such as Barbers and Stylists, respond to the economic conditions caused by the novel coronavirus. These programs include a loan and grant program under the Small Business Administration and expanded unemployment provisions.
The CARES Act creates a new loan program, the Paycheck Protection Program (PPP) within the Small Business Act (SBA) to encourage businesses to retain their employees and to help pay for certain other operating expenses. This program provides loans, with significant loan forgiveness (effectively a grant), intended to keep employees on the payroll, and businesses in operation, for eight weeks. It now allows independent contractors to remain in business (barbers, stylists, esthetician, etc). Applications open Friday, 4/10/2020.
Barbers are eligible to obtain the PPP forgivable loans to cover their lost income. The loan amount would be for lost income or payroll costs up to $100,000 for an individual prorated during the covered period. Mortgage interest, utilities, and rent can also be funded under this loan. An independent contractor can also use this loan to continue to employ his or her employees. The amount of the loan is 2.5 times the average monthly payroll costs calculated over the prior year.
Depending on your business’s situation, the loan size will be calculated in different ways (see below). The maximum loan size is always $10 million.
The maximum term is 2 years with a maximum interest rate of 1 percent. First payment is deferred for 6 months, 100% guarantee by SBA, no collateral, no personal guarantees. No borrower or lender fees payable to SBA.
Once a loan is obtained, if the proceeds are spent on payroll, mortgage interest, rent(booth rent), or utilities over the next eight weeks, up until June 30, 2020, the amount expended for these purposes will be forgiven, effectively turning that portion of the loan into a grant. Basically, FREE MONEY.
You must apply through your lender for forgiveness on your loan. In this application, you must include:
Any loan amounts not forgiven at the end of one year is carried forward as an ongoing loan with max terms of 2 years, at 1% max interest. Principal and interest will continue to be deferred, for a total of 6 months to a year after disbursement of the loan. The clock does not start again.
Applications may be made directly to the SBA or to an approved local bank. The network of banks eligible to process loans is being greatly expanded and you should check with your local bank to see if it is participating. Applications for independent contractors will be accepted beginning April 10, 2020. All loans are on a first come first serve basis.
Gusto compiled all the various grant and loan programs available in each state.