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CINCINNATI -- Friday marked the first time small businesses could apply for a new loan from the federal government. The nearly $350 billion being distributed nationwide is designed to save stores from closing for good and put money in the hands of employees.
The loans are being distributed in a first come, first served system for entrepreneurs and, in turn, their employees. The money can be used for payroll, rent and utilities, but the loans are expected to go quickly.
“Hopefully, this will give these small businesses a chance to reopen again, hopefully as soon as possible,” said Congressman Steve Chabot, who represents Ohio's first district.
It’s the multi-billion-dollar boost many have been waiting for. Ranking member of the House Committee on Small Business Chabot said for those who apply early, the money should arrive soon.
“We’re hoping that it’s quick,” Chabot said. “A week, two weeks. Something like that, but there’s no way to know for sure.”
Instead of calling the Small Business Administration, Chabot said the best way to apply is to call your local bank.
“That’s who’s going to make the loans,” Chabot said.
The application process may require some patience as everyone rushes to apply and banks are forced to adapt.
“The issue is that these rules are changing,” financial planner Crystal Faulkner said. “Everything’s fluid and the SBA literally is changing some of the rules almost daily.”
Faulkner’s firm is fielding calls non-stop about which businesses qualify and how long the money will be there.
“What so many employers are concerned about is the money running out, even though it’s almost a $350 billion stimulus package; it’s available to people that are really not much in terms of criteria,” Faulkner said.
Under the loan's payroll protection plan, 75% of the loan is supposed to help pay employees, with 25% going to things like rent and utilities -- but that comes with a major catch.
“The restaurant down the street or the one right here behind me that’s closed, they don’t have any employees to pay,” Faulkner said. “The only way they’re going to take advantage of the new 7A payroll protection loan is if they call those employees back and put them back on the payroll.”
Business owners can also apply for a disaster recovery loan, which can be paid back at a low interest rate over several decades. There are options for those without employees as well.
“Those individuals who operate as the sole proprietor or even a 1099 contractor can still apply for these loans,” Faulkner said. “The issue is the guidelines for the smaller, one-man businesses aren’t even out yet. It’s just not clear.”
Chabot said businesses who miss out on this initial opportunity will likely have another chance to apply at another point in time.
“As a fiscal conservative, I obviously think, ‘Can we afford to spend this money?' but also, 'Can we afford not to?'” Chabot said.
More information can be found on the Small Business Administration’s website.