As a business leader, you wear two hats: one for steering the company and another for supporting your people. The economic uncertainty of the last few years made balancing both responsibilities more challenging than ever. You were likely looking into coronavirus hardship loans to cover payroll while your employees were trying to figure out their own financial safety nets. This resource was created with that dual role in mind. We provide a clear update on the status of key business relief programs and offer guidance on managing any loans you received. We’ve also gathered essential information and resources to help your employees who may be facing personal financial hardship.
Navigating all of the information pertaining to the programs and benefits available due to our current pandemic has proven challenging. To relieve the additional stress impacting our clients, our agency has researched and listed valuable resources to help employers and employees alike to get through these unprecedented times.
Status of Major Federal COVID-19 Loan Programs
During the economic uncertainty of the past few years, many Washington businesses leaned on federal programs to stay afloat. These loans and grants were a critical lifeline, but their status has since changed, and most are no longer accepting applications. Keeping track of what’s available can be confusing, so we’ve broken down the current status of two major relief programs. Understanding where these stand is a key piece of your financial planning as you look toward the future—a future that includes sustainable growth and taking great care of your team.
Economic Injury Disaster Loan (EIDL)
The Economic Injury Disaster Loan (EIDL) program was a major source of support for small businesses and non-profits, offering both repayable loans and non-repayable advances. If you were hoping to use this program, the most important thing to know is that it is now closed. The Small Business Administration (SBA) stopped accepting new applications for the COVID-19 Economic Injury Disaster Loan at the beginning of 2022. A few months later, the agency also finished processing all requests for loan increases and reconsiderations for previously denied applications. The online portal for managing these loans has been shut down as well, bringing the program to a close.
CARES Act Recovery Assistance
The CARES Act directed significant funding to the U.S. Economic Development Administration (EDA) to help local communities get back on their feet. This assistance supported a variety of programs aimed at building regional economic health and resilience. While the positive effects of these projects will be felt for years, the funding period for this initiative is winding down. According to the EDA, all projects funded through its CARES Act Recovery Assistance are scheduled for completion by the end of September 2027. This means new funding is no longer being distributed, as the focus has shifted entirely to finishing the work that was previously approved.
EMPLOYERS
Employment Security Department
- Information for those affected
Department of Revenue
- Tax relief information
Washington Governor – Jay Inslee
- Resource list
Department of Commerce
- Crisis planning tools and resources
IRS
SBDC
- Small business resources
U.S Small Business Administration
- USBA is offering disaster loans to small businesses and nonprofits that have been affected by COVID-19.
- Visit SBA.gov/disaster for more information.
- For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail disastercustomerservice@sba.gov.
Business Impact NW
Craft3
- Loan opportunity
Facebook Small Business Grants Program
- Grant opportunity
Amazon Small Business Relief Fund
- Grant opportunity
Department of Commerce – Economic Opportunity Grant
Social Justice Fund Northwest
Managing an Existing COVID-19 EIDL
If your business received a COVID-19 Economic Injury Disaster Loan (EIDL), you’re likely moving into the management and repayment phase. The application window for this program has closed, but understanding your ongoing obligations is key to keeping your business financially healthy. This loan program was a lifeline for many Washington businesses, offering the capital needed to cover operating expenses and get through a period of intense economic uncertainty. Now, the focus shifts to managing the loan responsibly. Let’s walk through the essential details you need to know to handle your EIDL with confidence and avoid any potential pitfalls down the road.
Understanding Your EIDL
The EIDL program was created by the U.S. Small Business Administration (SBA) to provide direct financial assistance to small businesses and non-profits that suffered economic harm due to the pandemic. These low-interest, long-term loans were specifically intended to help cover working capital and normal operating expenses that businesses were suddenly struggling to meet. Think of it as a crucial support system that helped many organizations keep their doors open and their teams employed during a period of significant disruption. Knowing the original purpose of these funds can help you stay aligned with the loan’s terms as you move into the repayment stage.
EIDL Loans vs. EIDL Advances
It’s important to distinguish between the two types of funding offered under the EIDL program: loans and advances. The EIDL loan is the portion that requires repayment over time, just like a traditional loan. The EIDL Advance, on the other hand, functioned as a grant and does not need to be repaid. Many businesses received both. Double-checking your original paperwork to confirm how much you received as a loan versus an advance is a critical first step in your financial planning. This distinction will directly impact the total amount you are responsible for repaying to the SBA.
EIDL Repayment Details
When it comes to repaying your EIDL, the details matter. The SBA established a generous deferment period, but that doesn’t mean you can forget about the loan. Borrowers are required to start making monthly payments 30 months from the date the loan funds were disbursed. This extended grace period was designed to give businesses time to get back on their feet before payments kicked in. However, it’s crucial to be proactive and prepare for this obligation. Knowing your first payment due date and setting up a repayment plan ahead of time will prevent financial strain and ensure you stay in good standing with the SBA.
Managing Payments and Interest
One of the most important things to remember about your EIDL is that interest began accruing from the day you received the funds, even during the 30-month deferment period. This means your loan balance has been growing while payments were on hold. You can make payments at any time during the deferment without a prepayment penalty, which can help reduce the total interest you’ll owe over the life of the loan. To stay on top of your account, you can manage your EIDL through the SBA’s online portal, where you can check your balance and make payments.
The SBA Hardship Accommodation Plan
If your business is still facing financial challenges and you’re worried about making your full EIDL payment, the SBA has an option that might help. The Hardship Accommodation Plan allows eligible borrowers to make reduced payments for a six-month period. Under this plan, you would pay 10% of your monthly payment amount (with a $25 minimum) for six months, without it being considered a default. This can provide temporary relief and give you time to improve your financial situation. It’s a valuable safety net, but remember that interest will continue to accrue during this time, so your loan balance will still increase.
Consequences of Loan Default
Staying current on your EIDL payments is critical. If your loan becomes more than 120 days past due, the SBA may refer it to the U.S. Treasury for collection. This is a serious step that can have significant negative consequences for your business and potentially your personal credit. The Treasury has powerful collection tools at its disposal, so it’s essential to avoid this scenario. If you anticipate having trouble making a payment, be proactive. Reach out to the SBA to discuss your options, like the Hardship Accommodation Plan, before you fall behind.
Special Considerations for Non-Profits
For non-profit organizations, managing an EIDL comes with a few unique considerations. While the loan provided much-needed stability, it also introduced new compliance responsibilities. Juggling these financial obligations on top of managing employee benefits and daily operations can be a lot to handle. At WHIA, we understand the specific challenges facing non-profits. We partner with organizations like yours to streamline benefits administration, freeing up your team to focus on mission-critical tasks, including navigating complex requirements like federal loan compliance.
Single Audit Requirements
If your non-profit received an EIDL and expended $750,000 or more in federal funds within a single fiscal year, you may be subject to a “Single Audit.” This is a rigorous audit of your organization’s financial statements and federal awards to ensure compliance with government regulations. It’s a requirement designed to promote financial transparency and accountability for how federal funds are used. Preparing for a Single Audit can be a complex and time-consuming process, so it’s important to be aware of this threshold and maintain meticulous financial records if your organization is approaching it.
EMPLOYEES
Current Lenders
- Many banks are offering additional assistance during this time. If you are struggling to pay your mortgage, credit cards and/or auto loans, call your lender to find out what relief opportunities they are offering. The link below contains a recent list of banks that are offering relief options. Click here for a recent list of banks that are offering relief options
Employment Security Department
- This chart can assist in figuring out which unemployment benefit applies to your unique situation
- Helpful information for workers affected by COVID-19
Department of Labor & Industries
Washington Paid Family & Medical Leave
- PFML FAQs
U.S Department of Agriculture
- Assistance feeding kids and others in need
Understanding Financial Hardship and Personal Loans
Financial hardship can feel isolating, but it’s a situation many people face, especially after major events disrupt the economy. It’s defined as a significant change in your financial circumstances that makes it difficult to cover essential living expenses. This could be due to a sudden loss of income, a medical emergency, or another unexpected crisis. When you’re in this position, knowing where to turn for help is the first step toward getting back on your feet. There are various programs and financial tools designed to provide a safety net during these challenging times.
Understanding the options available, from federal assistance programs to personal loans, can give you a clear path forward. Each option has its own set of qualifications and implications, so it’s important to gather the right information before making a decision. Just as having an expert guide you through complex topics like health benefits for your small group is essential for your business, having clear, reliable information is key to managing your personal financial health. This guide breaks down what financial hardship means, what resources are available, and how to determine the best course of action for your situation.
What Qualifies as COVID-19 Financial Hardship?
The term “financial hardship” became much more common during the pandemic, and federal programs created specific definitions for it. According to the U.S. Department of the Treasury, it generally means you’ve experienced a significant reduction in your income or a material increase in living expenses connected to the pandemic. This financial strain creates a risk of falling behind on your mortgage, utilities, or other essential payments, potentially leading to foreclosure or displacement. If your financial stability was directly impacted by the pandemic, you might have qualified for specific assistance programs designed to provide relief and help you stay in your home.
Federal Programs for Homeowners
In response to widespread financial challenges, the federal government established programs aimed at providing direct relief to those most affected. For homeowners, these initiatives were created to offer a lifeline, helping to prevent a wave of foreclosures and ensure families could remain in their homes. The most significant of these is the Homeowner Assistance Fund, which distributes funds to states to help their residents. This program is a key resource for anyone struggling to keep up with housing-related costs due to pandemic-related hardship and is worth looking into if you meet the criteria.
The Homeowner Assistance Fund (HAF)
The Homeowner Assistance Fund (HAF) was created specifically to help homeowners who are struggling financially because of the COVID-19 pandemic. Think of it as a relief fund designed to help you catch up on essential housing expenses. The money from HAF can be used for a variety of needs, including making mortgage payments, paying for homeowner’s insurance, and covering utility bills. The goal is to provide stability and prevent foreclosure for those who have fallen behind due to circumstances beyond their control. Each state manages its own HAF program, so you’ll need to check with your state’s housing authority for specific eligibility requirements and application details.
How Personal Hardship Loans Work
When you’re facing a financial emergency, a personal hardship loan can act as a safety net. It’s essentially a type of personal loan you can borrow to cover bills and unexpected costs during a difficult period. Unlike grants or other forms of assistance, a hardship loan needs to be repaid, but it can provide the immediate cash flow required to manage a crisis. These loans are designed to bridge a temporary gap in your finances, giving you the breathing room you need to get back on track without falling further behind on your financial obligations.
Common Reasons for Needing a Hardship Loan
People turn to hardship loans for a wide range of reasons, most of which are sudden and unexpected. These situations often create an immediate need for funds that simply isn’t covered by savings. Some of the most common triggers include:
- Unexpected and expensive medical bills
- Funeral and burial costs for a loved one
- Urgent home repairs after a natural disaster
- Emergency car repairs needed for work or family transport
- Sudden job loss or a significant reduction in income
- Being a victim of a crime or identity theft
- Needing funds to avoid foreclosure or eviction
Qualifying for a Loan with Bad Credit
It’s a common myth that you can’t get a loan if you have a poor credit score. While having good credit certainly helps, it is possible to get a hardship loan with bad credit. Some lenders specialize in loans for people with lower scores, though the interest rates may be higher. Lenders will look at your entire financial picture, not just your credit score. They’ll consider factors like your income, employment history, and your debt-to-income ratio to assess your ability to repay the loan. It’s always a good idea to check your credit report and shop around with different lenders to find the best possible terms.
Alternatives to Taking a New Loan
Before you commit to a new loan, it’s wise to explore all your other options. Taking on new debt, even during an emergency, can have long-term financial consequences. In some cases, there may be better alternatives available that don’t involve borrowing more money. For example, you might be able to negotiate with your current creditors, tap into existing assets, or seek assistance from non-profit organizations. Taking the time to review these alternatives can help you make a more informed decision that supports your financial recovery without adding unnecessary strain down the road.
Withdrawing or Borrowing from a 401(k)
Tapping into your retirement savings is another option, but it should be approached with caution. You can take a hardship withdrawal from your 401(k) for a serious and immediate financial need, but this is not a loan and cannot be paid back. The money you withdraw is typically subject to income tax and may also come with a 10% penalty if you’re under the age of 59 ½. Some plans also allow you to borrow from your 401(k), which you do have to pay back with interest. While it can be a source of quick cash, taking money from your retirement fund can impact your long-term financial security.
Requesting Deferment or Forbearance
If your financial hardship is temporary, contacting your current lenders may be one of your best first steps. Many lenders offer deferment or forbearance programs that allow you to pause or reduce your payments for a short period. Forbearance lets you temporarily stop making payments, though interest may still accrue. Deferment also allows you to pause payments, and depending on the loan type, interest might not accrue during that time. This can provide immediate relief on mortgages, auto loans, or student loans, giving you time to stabilize your finances without defaulting on your obligations.
Frequently Asked Questions
I received both an EIDL loan and an EIDL advance. Do I have to pay both back? This is a great question, as the distinction is important. You are only required to repay the EIDL loan portion. The EIDL Advance functioned more like a grant and does not need to be paid back. It’s a good idea to review your original loan documents from the SBA to confirm the exact amounts you received for each, so you have a clear picture of your repayment obligation.
My business is still recovering and I’m worried about making my full EIDL payment. What’s my first step? The most important thing is to be proactive and not wait until you miss a payment. The SBA offers a Hardship Accommodation Plan for businesses that are still facing financial challenges. This plan could allow you to make significantly reduced payments for a six-month period, giving you some breathing room. You should contact the SBA directly to discuss your situation and see if you qualify for this or other options.
Are there any other federal COVID-19 relief loans I can apply for now? The major federal loan programs established during the pandemic, like the EIDL and CARES Act assistance, are now closed to new applicants. The government’s focus has shifted from distributing new funds to managing the loans that were already provided. We recommend reviewing the resource lists in this article for any state or local programs that may still be available to support businesses in our community.
One of my employees is struggling to pay their mortgage. What’s the best resource to share with them? It can be difficult to know how to help your team with personal financial matters. A great starting point is to direct them to information about the Homeowner Assistance Fund (HAF). This is a federal program, managed by the state, designed specifically to help homeowners catch up on mortgage payments, utilities, and other housing costs due to pandemic-related hardship.
Is taking a loan from a 401(k) a good idea for a financial emergency? While borrowing from a 401(k) can seem like a quick fix, it comes with significant risks and should be considered very carefully. You’re not only pulling from your future retirement savings, but withdrawals can also be subject to taxes and penalties. Before going this route, it’s often better to explore all other alternatives, such as requesting a temporary forbearance or deferment from current lenders.
Key Takeaways
- Federal Relief Programs Have Shifted to Repayment: Key programs like the EIDL and CARES Act are no longer accepting new applications. Your priority now is to create a clear plan for managing any existing loans to maintain your business’s financial health.
- Stay Ahead of Your EIDL Obligations: Interest on your EIDL has been growing since day one, even during the deferment period. Prepare for your monthly payments, and if you’re facing financial strain, explore the SBA’s Hardship Accommodation Plan before you miss a payment.
- Support Your Team Through Personal Financial Hardship: You can help your employees by pointing them toward reliable resources. Understanding options like the Homeowner Assistance Fund or payment forbearance can provide them with a clear path forward during difficult times.
Related Articles
- Diving Into The CARES Act – Washington Health Insurance Agency
- Financial Assistance and Debt Relief Resources for Washingtonians Affected by COVID-19 – Washington Health Insurance Agency
- Families First Coronavirus Response Act – 10 Key Points Employers Need to Know – Washington Health Insurance Agency