By James Chittenden
Everyone wants free money or loans, and owners of startups and small businesses have pursued imagined prizes of grants and easy loans for decades. In reality, free money to start a small business is very rare. However, the political environment is favorable for economic relief for small businesses and self-employed people.
The biggest myth about grants
“I should receive free money or loans because I am a minority, woman, veteran, or ex-convict”
Grants are for nonprofit organizations, and are almost non-existent for for-profit businesses. Don’t look to the government to provide free money to start a business or fund ongoing business operations. While there are government grants available to help accomplish specific purposes, those are not awarded on the basis of gender, race, or veteran status.
Also, banks lend to businesses that are woman, minority, or veteran-owned using the same criteria as lending to those businesses that are not. That criteria is solid credit and operating history, as well as sufficient collateral. However, there are organizations that specialize in arranging credit for underserved populations.
What is Bench and who should use it?
Bench offers online bookkeeping services to small businesses. It is ideal for freelancers and small businesses with annual sales of less than $1,000,000.
A Bench bookkeeper will reconcile your bank accounts, categorize your income and expenses, and prepare your financial statements. See pricing and get started on a free trial today.
PPP Forgivable Loans
Paycheck Protection Program (PPP) loans are fully forgivable and use of funds include but are not limited to payroll and utilities. A forgivable loan used within the guidelines in essence convert to a business grant from the federal government.
- PPP borrowers can set their PPP loan’s covered period to be any length between 8 and 24 weeks to best meet their business needs;
- PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures;
- The Program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations;
- The PPP provides greater flexibility for seasonal employees
You can apply for a PPP loan via Fundera here.
Bench published the following guidance for PPP loans:
PPP forgiveness requirements
The purpose of the Paycheck Protection Program is to, well, protect paychecks. You must commit to maintaining an average monthly number of full-time equivalent employees equal or above the average monthly number of full-time equivalent employees during the previous 1-year period. And you must spend 60% of the loan funds on payroll.
The amount that can be forgiven will be reduced…
- In proportion to any reduction in the number of employees retained.
- If any wages were reduced by more than 25%.
If you rehire employees that were previously laid off at the beginning of the period, or restore any decreases in wage or salary that were made at the beginning of the period, you will not be penalized for having a reduction in employees or wages. For loans received in 2020, the deadline to do so was December 31, 2020. For loans received in 2021, we are still waiting on more information to be released.
A new exemption on re-hiring employees
Employees who were laid off or put on furlough may not wish to be rehired onto payroll. If the employee rejects your re-employment offer, you may be allowed to exclude this employee when calculating forgiveness. To qualify for this exemption:
- You must have made an written offer to rehire in good faith
- You must have offered to rehire for the same salary/wage and number of hours as before they were laid off
- You must have documentation of the employee’s rejection of the offer
Note that employees who reject offers for re-employment may no longer be eligible for continued unemployment benefits.
Welcome to One Click Advisor! We would be remiss if we didn’t give you a brief tour of the site and what it can do for you. The free Business Builder is a consulting session, solving your business plan questions in minutes. Your challenges and opportunities can be sorted into one of three areas.
Marketing, because it brings in the customers. Start or continue that plan here.
Operations, because it keeps your customers. Start or continue that plan here.
Finance, because it is the scoreboard. Change the “score” and explore financing here.
There are many free resources, including funds, available for small businesses.