Last week, Congress passed an historic $2 trillion economic relief package in an attempt to keep the U.S. economy running amid the coronavirus fallout.
The measure provides a lifeline for both individuals and small businesses who have been financially affected by the COVID-19 outbreak. It comes at a time when local and federal officials are ordering non-essential businesses to close — and people to stay home — to curb the spread of the virus.
This has effectively shut down a big chunk of Charlotte’s economy. Retailers are only taking online orders, and restaurants and bars are doing pick-up and delivery orders only. Caterers and other companies reliant on events have paused their operations. Since the middle of March, nearly 300,000 people in North Carolina have applied for unemployment benefits because of COVID-19.
The Coronavirus Aid, Relief and Economic Security (CARES) Act, which President Donald Trump signed into law on Friday, is the third round of federal support aimed at providing economic relief in response to COVID-19.
Both small employers and individuals are still navigating what the legislation means for them, and how they should proceed.
Already, Congress is talking about the need for a fourth phase of the plan. For now, let’s take a look at what the latest round means for both people and small businesses locally.
What will it mean for individuals?
The package includes a sum of $1,200 for most Americans. How much you receive, however, depends on your income.
The full $1,200 goes to individuals who make $75,000 or less. After that, the payments decrease until your adjusted gross income reaches $99,000. (People who make more than that won’t receive any portion of the $1,200 checks.) Each child 16 and under in the household is eligible for an additional $500, again depending on their parents’ incomes.
Married couples are eligible for $2,400 as long as their combined salary does not exceed $150,000.
You can calculate how much you’ll get from the $1,200 stimulus checks using this calculator from The Washington Post.
Unemployment benefits: The legislation includes an extra $600 per week for up to four months. That’s on top of what individuals can receive from state governments. In North Carolina, the maximum amount in unemployment benefits you can get from the state is $350 per week. (So the new maximum here, at least for the time being, would be $950 per week.)
Contractors, freelancers, and other self-employed individuals will be eligible for the federal unemployment benefits. That’s big, because in North Carolina, contractors are typically excluded from receiving jobless benefits.
Here in North Carolina, the Division of Employment Security (DES) is awaiting guidance from the federal government about issuing the weekly $600 payments, according to DES spokesman Larry Parker. Those payments would be in effect for April 4 to July 31. Once the federal government provides that guidance, payments will be issued within two weeks.
In order to receive the weekly $600 from the federal government, people have to file for unemployment through their state.
“Any benefits owed will be paid retroactively,” Parker said in an email.
What will it mean for small businesses?
Paycheck Protection Program: The federal package includes $350 billion in forgivable loans for small businesses through an initiative called the Paycheck Protection Program. In this case, “small” refers to companies that employ fewer than 500 people.
The loans, which have an initial interest rate of 0.5 percent, can go toward expenses like rent, utilities, and payroll (of employees who make less than $100,000.) They would go toward costs businesses incur between February 15 and June 30. The maximum amount a business could take out is $10 million.
The goal of the program is to infuse small businesses with capital at a time when they have little or no incoming revenue. Essentially, it’s aimed at keeping them afloat.
By offering forgiveness for costs incurred during the first eight weeks of the loan, the program incentivizes small businesses to keep employees on their payrolls.
You can find the application for the loan here, through the Treasury Department’s website. According to the Small Business Administration, lenders can start processing loan applications as soon as April 3.
In a briefing this week, experts with the UNC Kenan Institute discussed the effects of the pandemic on the country’s small businesses. Without “effective governmental support,” they said, layoffs among smaller firms could contribute an additional 11.5 percentage points to the unemployment rate. This would roughly quadruple the current national rate.
“I think we could see a sizable fraction of our small businesses permanently shutter,” UNC finance professor Christian Lundblad said.
Did you know? With the SBA loans, neither banks nor attorneys can charge the business a fee for services to help process the loan. Instead, the federal government covers those fees on the back end.
The Post has a helpful Q&A about the loan application for the federal government’s newest small business program, which is separate from other SBA relief programs.
Is this small business relief enough?
Janet LaBar is CEO of the Charlotte Regional Business Alliance, a public-private organization and Charlotte’s largest business group. She has a standing call with economic development leaders from peer cities like Atlanta, Seattle, Portland, and Phoenix. This week’s discussion: the CARES Act.
Several expressed concern that CARES isn’t sufficient to completely support the 30 million small businesses across the nation.
“Not every small business will be eligible to access the funds,” LaBar says, “with all due respect to the federal government and the package that was passed.”
On top of that, the SBA is already overwhelmed with demand, much like North Carolina’s unemployment office currently is.
Some city governments nationwide are stepping up to assist small businesses. In Seattle, the city set up a block grant program that gives up to $10,000 in capital grants to qualifying small businesses. Atlanta established a zero-interest loan program for small businesses affected by COVID-19.
Local government involvement may be necessary here, too. Assistance could come in the form of setting up small business hotlines to answer questions about how to navigate the downturn, LaBar says.
“We would like to be supportive to the city in any which way,” LaBar says of the Alliance.