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COVID Stimulus Loan: What Is It & How To Apply For It?

Due to the unexpected response to the Coronavirus pandemic people have been advised to prioritize social distancing in order to prevent the spread of the virus. Economy has taken a huge fall in these past few weeks because of business closures and travel restrictions.

In order to restore the economy, the CARES Act also known as the CoronaVirus aid, Relief and Economic security act was passed last week by the US lawmakers. A disaster similar to this occured in 2009 known as the Financial crisis in which an act was passed to help stabilize the economy. Looking back at the history the budget of the CARES Act is the double of the Financial crisis act in 2009..

The CARES Act contains around 2.2 trillion dollars that is to be divided among various individuals and also can be used to serve various purposes. Basically this act was designed to help companies that are severely affected due to the economic downfall caused by this outbreak. Some companies are affected due to their employees not being able to come to work because of the lockdown and the rest are lacking demand for their products. A few tech companies are experiencing a rise in their sales while some businesses have gone from ten to zero.

Some Important points regarding the COVID-19 Stimulus Loan are as follows:

Funds Distributed individually:

The US economy is planning to provide door to door service to the people in need of the loan using helicopters. They are referring to it as a direct cash payment to the individuals and their families. That rounds about to a total of 30 percent of the total CARES Act. The main part of this plan is to provide direct payment to the citizens running businesses and families according to the number of children. Some other key points about this act are listed:

  • Student loans:

Majority of the students were put to ease as the CARES Act was passed by the law. The important thing about this act was that both monthly payments and interest accrual held by the federal government on most student loans were to be suspended  until late september.

The remaining community who had taken their loans from private companies are in a state of shock and are trying to find ways to get them out of this situation. Though it doesn't stop any private lender companies to stop their payment or from adding interests.

The Private student loan market has a worth of billions which is still a fraction of the federal one. The federal market goes up to a trillion dollars and is also growing as the cost of education goes up. The amount of payday loans are comparatively less than the private student loans in America and more than a million students are using private student loans per year.

  • Borrowers:

The Borrowers who are listed in the list of people with federally backed loans can request leniency in mortgage payments for up to six months.

  • Expansion of Unemployment Benefits:

Due to the pandemic the authorities have announced an expansion of unemployment benefits. It includes almost everyone such as freelancers, workers in the gig economy and laid off employees.

Big Businesses:

The big businesses take about a total of 25 percent of the budget from the CARES Act. It is aimed at stabilizing large scale businesses and especially the ones located in the mostly affected sectors.

The first company to receive this support will be the airlines. Around 58 billion dollars have already been reserved for commercial and cargo airlines. There is a slight chance of a ban regarding the activities in stock buybacks for companies receiving stimulus money. It is mainly due to recent criticism and the term of the ban will be the term of the loan plus one year.

Small Businesses:

The small businesses will also be getting some aid from the CARES Act and it is about 19 percent of the total amount. The qualifying companies can be provided with a loan upto 10 million dollars as instructed by the authorities. Things like paying the rent and keeping employees on their company roster can be done using this loan.

State and Local Government:

It is without a doubt that there is a portion of funds allocated for the State and the Local Government. 17 percent of the total funds are going to local governments to help them fight this virus. Some of that will also be directed towards schools and child care services.

Public and Health Services:

A very large ransom of this fund will go to Public and Health Services that rounds about a 100 billion dollars to help fight COVID-19. It was necessary to provide the health services with such an amount as the root of this pandemic is related to health. Right now the health officers and hospitals are focusing on increasing the amount of ventilators for incoming patients.

The CARES Act also helps the food security programs and educational services.

Paycheck Protection Program:

The economic sector under new guidance issued by the small business administration are helping non-profits and faith-based groups by providing them with a PPP loan also known as the Paycheck Protection Program. It will help keep small business on track and help keep the economy stable somehow during this pandemic, but most companies are still not covered under this loan.

Around 450 billion dollars is set to be distributed among small businesses through loans and the distributors would be the Small Business Administration and some other organizations. In this way the authorities can prevent the employment rate from going down by keeping the businesses running.  

The purpose of the Paycheck Protection Program was to accomplish mainly two objectives. First, to help cover the working expenses for the company in case of the worst possible scenario. Second, to provide their employers with a handsome incentive in order to retain their employees. The true intention of the program is to allow small businesses that are affected due to this pandemic to survive without changing their course of action.

How Can We Help?

At BlueSky Accounting we can help you file the required documentation to increase your loan approval chances. Additionally, we provide these services at the present moment:

  • Virtual CFO Services
  • Bookkeeping Services
  • Business Advisory Services
  • Payroll Services
  • Tax Services
  • Small Business Accounting Services



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