Pandemic Relief Funding in 2020: Programs distribute $2 billion to Alaska's small businesses.

• Author: Barbour, Tracy
• Position: FINANCE

With the pandemic pummeling every industry in Alaska during the bulk of 2020, many companies were able to leverage federal economic assistance through the Coronavirus Aid. Relief, and Economic Security (CARES) Act. Businesses in various industries took advantage of opportunities like the Payroll Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) to retain staff, pay critical expenses, and keep their doors open.

Without these borrower-friendly funding options, many Alaska businesses would have had an even tougher time surviving this pandemic.

PPP and EIDL Funding Details

CARES Act federal aid has been a critical lifeline for companies in Alaska and elsewhere. The PPP loan was implemented by the Small Business Administration (SBA) and US Treasury Department primarily to finance payroll for small businesses impacted by the novel Coronavirus pandemic. The program--which reopened in January and is once again accepting applications--expanded the traditional SBA 7(a) loan program to offer businesses loan forgiveness for retaining their employees.

Under the original provisions, PPP loans carried an interest rate of 1 percent and matured in two years if issued prior to June 5, 2020 or five years if issued after June 5. No collateral or personal guarantees were required, and neither the government nor lenders could charge small businesses any fees. In addition, loan payments were deferred for borrowers who apply for forgiveness and meet other criteria.

The EIDL program offers alternative funding in the form of a loan up to $2 million and/or loan advance up to $10,000. EIDL assistance is designed to support small businesses, small agricultural cooperatives, and nonprofit organizations that are experiencing a temporary loss of revenue. The loan proceeds provide working capital to help borrowers cover normal operating expenses, including healthcare benefits, rent, utilities, and fixed debt payments.

EIDL funding has a higher interest rate than a PPP loan, but it has longer repayment terms and fewer spending limitations. Under EIDL, the interest rate will not exceed 4 percent, the maturity is up to thirty years, and there are no pre-payment penalty or fees. However, loan amounts of more than $25,000 require collateral, preferably real estate.

The EIDL program is administered directly by the SBA, so applicants don't need to work with a local lender. Instead, they can apply online, and the SBA will send an inspector to estimate the cost of their damage. On June 15, 2020, SBA resumed accepting new EIDL applications from eligible small businesses and private nonprofits.

Loan Volume and Numbers

In terms of loan volume, PPP, EIDL, and EIDL Advance programs distributed around $2 billion directly to Alaska's small businesses and nonprofits at a time when they desperately needed it, according to Jon Bittner, executive director of the Alaska Small Business Development Center (SBDC). "That was in addition to the additional UI [unemployment insurance] benefits, one-time individual stimulus payments, and a host of other federal support," Bittner says. "These funds were crucial to preventing the economic impacts of COVID-19 from crippling our economy. It's important to note that even with all of that support, we still saw unprecedented unemployment levels and a large number of...