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Grow Your Business Finances

Deal Reached on $2T Coronavirus Stimulus: What It Includes for SMBs

image for Mladen Zivkovic / Getty Images
Mladen Zivkovic / Getty Images

Update: President Donald Trump signed the CARES Act Friday afternoon following its passage in the House of Representatives. The $2 trillion economic relief bill is designed to mitigate the economic impact of the coronavirus pandemic. 

The economic impact of COVID-19, also known as the coronavirus, prompted the Senate and the Trump administration to release a $2 trillion stimulus package intended to bolster businesses and individuals, as many Americans remain out of work because of the pandemic. The legislation includes the creation of a forgivable loan program through the SBA, known as the Paycheck Protection Program, and direct payments to individual Americans. 

What's in the coronavirus stimulus plan for small businesses?

[Looking for more help during the coronavirus pandemic? Visit business.com's COVID-19 Resource Center for more information.]

The Senate's stimulus package, which was announced just after 1 a.m. on Wednesday, is the result of days of negotiations between Senate Minority Leader Chuck Schumer (D-NY) and Treasury Secretary Steven Mnuchin. The Senate's current proposal includes the following measures:

  • Direct payments of $1,200 to most individual Americans who make up to $75,000 annually, or $2,400 to couples who make up to $150,000 annually
  • An unemployment insurance expansion that increases the maximum available benefit by $600 per week and provides laid-off workers four months' worth of full pay
  • Small business loans totaling $367 billion
  • State and local government subsidies totaling $150 billion
  • Hospital aid totaling $130 billion
  • Distressed industry loans (such as for airlines) totaling $500 billion

The measure, which was still being drafted at the time of this writing, would need to pass in both the Senate and the House of Representatives before heading to the White House for signing. As of this writing, the Senate plans to vote on the measure later in the day on Wednesday, while it is less clear when to expect a vote in the House. House Democrats, under the leadership of Speaker Nancy Pelosi (D-CA), previously released their own stimulus plan.

Many small business owners have been hit particularly hard by the effects of the coronavirus pandemic. Most have shuttered their physical locations, either shifting to a work-from-home model wherever possible or suspending operations completely. Many small businesses have been forced to get creative to keep cash flow stable in the early weeks of a crisis that could last several more weeks to months.

"The stated goal is to keep things in check for the next eight to 12 weeks and prevent as much disruption as possible," said Farhan Ahmad, founder and CEO of small business expense management company Bento for Business.

The stimulus plan's direct payments to individuals, loans for small businesses, distressed industry loans and unemployment insurance expansion are designed to keep the economy afloat while the coronavirus pandemic is addressed. For many small business owners, the stimulus package could buy some much-needed time, but it is not a cure-all.

As details of the stimulus plan become clearer, small businesses across the country are wondering how to take advantage of it. Whether they use direct individual payments to inject their businesses with capital or accept small business loans, entrepreneurs have some strategizing to do. However, Ahmad cautioned, stimulus is but one part of the larger equation.

"The first thing [to know] is that a stimulus package is not a solution to any problem," Ahmad said. "This is borrowed time; that's all we're getting is borrowed time to get things in order."

While $2 trillion might seem like a lot, Ahmad added, when broken down to its individual parts across all the small businesses and individuals in the country, it is not enough to carry entrepreneurs through the remainder of the pandemic.

"Best-case scenario: this is buying a little bit of time to see how bad things are or if they are beginning to recover," he said.

So, how should small businesses spend any stimulus-related funding they receive?

"If possible, use [the stimulus] to keep the door open," said Jonathan Dane, director of research and portfolio strategy at The Coury Firm. "If the [business] has to close, use it to pay the bills and keep staff employed. This isn't capital to invest in the core business; it's lifeline capital to pay the bills until they can reopen."

"For weaker businesses, simply making payroll and keeping up with suppliers is going to be critical," said Leigh Fatzinger, CEO of Turbine Labs. "For healthier businesses, any benefits they can realize from the stimulus should be focused on ensuring they maintain their markets and potentially grow when the crisis has subsided."

While the stimulus package has been a long-awaited and hard-fought measure, it is far from the only thing small businesses need to bear the brunt of the coronavirus pandemic. Every small business should be actively planning today for a long-term recovery effort. At the core of that effort is understanding that even a return to normalcy won't assuage the economic damage of the pandemic completely.

"It'll help, but no amount of stimulus can offset the impact to the economy from the collapse of consumer in-person spending," said Dane. "The stimulus will help prevent us from going into a deep recession that we can't bounce out of quickly, but make no mistake – it can't stop the recession."

That means small business owners need to prepare for a lengthy crisis and plan for a long recovery period through less-than-ideal economic circumstances. According to Dane, that means investing in omnichannel and online sales, which can improve revenue to some degree and make it easier for small businesses to keep cash on hand.

What is critical for small business owners right now, Ahmad said, is shifting away from a "growth-first" mentality to a strategy of supporting cash flow for the midterm. This involves a reduction in expenses wherever possible, especially for businesses that have suspended operations during the coronavirus pandemic.

"It is critical right now to create a 12-month survival plan," Ahmad said. "It's about creating a plan that says, 'If growth slows to this level, how much cash do I need to stay solvent?'"

Ahmad has these recommendations for small business owners:

  • Try to delay payments or establish payment plans with any landlords or creditors.
  • Renegotiate loan terms to lower payments, if possible.
  • Cancel all planned nonessential expenditures.
  • Begin daily monitoring of expenses, revenue and cash flow plans.

"The worst thing you could do is take out a loan and blow through it," he added. "There is no help coming for 12 weeks at least, so don't think growth first. Changing this mindset is a big deal."

Ahmad said he ultimately expects an economic recovery, but not before economic growth slows by up to half. In that time, many businesses will face challenges they must overcome if they are to survive the coronavirus pandemic. However, Ahmad said, a simple task can help entrepreneurs begin the daunting task of crisis planning: "Keep monitoring cash flow daily."

"I think there's a lot of doom and gloom right now … but there is nothing structurally wrong with our economy right now – it's the crisis," Ahmad said. "I'm optimistic we'll recover from this as a country and small business owner[s] generally."