In order to help small businesses in America weather the economic turmoil brought upon by COVID-19, the United States Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020.

This law was introduced in order to provide relief for businesses that have faced a negative economic impact as a result of the spread of the coronavirus (COVID-19) in the United States. As a part of this $2 trillion relief package, this bill provides $350 billion in forgivable loans for small businesses as well as payroll-tax deferment.

The full law (H.R.748) can be read at Congress.gov.

If your e-commerce business has been affected by the coronavirus, you should begin applying for these loans as quickly as possible.

Updates as of 9:00 am Monday, April 6:

  • Loans are available for eligible small businesses that have fewer than 500 employees and have been impacted by the coronavirus. These businesses must have been in business as of February 15, 2020, and they must have ongoing payroll expenses through continuing to keep workers employed for the duration of the coronavirus pandemic.
  • Ecommerce retailers that were forced to close as a result of this pandemic but continue to employ their workers throughout this pandemic can receive payroll-tax relief since they will be ineligible for small-business loans. 
  • Starting on April 3, small businesses and sole proprietors were able to apply for these loans. Any independent contractors or individuals who are self-employed can apply beginning April 10.
  • 1099 workers will be able to apply for loans independently, so business owners should not include 1099 payments when determining their average monthly payroll.
  • Small Business Association (SBA) affiliation standards have been waived for franchises in the SBA’s franchise directory. Because these standards still apply for Venture Capital portfolio companies, they are currently unable to receive a Paycheck Protection Program (PPP) loan. The National Venture Capital Association (NVCA) is working toward changing or removing these standards.
  • The loan rate will not exceed 4% interest, and the terms will not exceed 10 years.
  • Loans may be issued through any institution that is insured by the FDIC as well as credit unions and farm credit systems.

I own an e-commerce business, Where can I get money quickly?

Ecommerce business owners can receive relief money through Paycheck Protection Program (PPP) loans OR Small Business Association Economic Injury Disaster Loans.

While SBA disaster loans can be used for more purposes than PPP loans, they require businesses to complete more paperwork and provide more information and funds upfront.

If you want to receive relief money as quickly as possible, you should opt for PPP loans.

At a glance: PPP loans for e-commerce businesses

PPP loans were created to provide incentives for businesses to continue employing their workers, paying rent and other necessary running costs, and addressing pre-existing debts.
You can apply for a PPP loan for your e-commerce business HERE.

How much money will I be able to receive for my e-commerce business?

With PPP loans, eligible e-commerce businesses can receive loans to cover two and a half months of payroll up to $10 million.

Simply calculate your total payroll expenses from the past calendar year, and divide this number by 12 to determine your monthly payroll average. Your business will be eligible to receive 2.5 times this monthly average as a 10-year loan with a maximum of 4% interest.

Remember that you should not include any 1099 payments or Federal taxes when calculating your monthly average.

Ecommerce businesses can receive this loan without any collateral, and they will receive forgiveness for this loan provided they only use it for payroll, rent or mortgage, and utilities between the date they receive the loan and June 30, 2020.

How can I use Paycheck Protection Program money?

In order to receive full loan forgiveness from the government, you may only use your PPP loan for:

  • Payroll
  • Mortgage, rent, and utility payments (if necessary for your e-commerce business)
  • pre-existing debt
  • Costs for retaining employees (salaries, health benefits, etc.)

Applying for Paycheck Protection Program loans

Receiving money from PPP loans only requires a few simple steps:

  • Fill out this form HERE
  • Apply for a loan at an SBA approved bank, credit union, or farm credit system institution
  • Prepare the information necessary for the loan (Employer Identification Number, Tax ID number, and taxes from 2017-2019)
  • Provide proof payroll costs, mortgage or rent payment costs, utility costs, and show how coronavirus has impacted your e-commerce business

It is important for you to prepare this information and apply for a PPP loan as soon as possible to help expedite this process.

My e-commerce business is VC-backed, can I still apply for the Paycheck Protection Program?

At this time, No. SBA affiliation standards have not been waived for businesses that are Venture Capital backed.
However, the National Venture Capital Association (NVCA) is hard at work to get this part of the CARES Act changed.

At a glance : SBA Disaster Loans

What is the SBA Disaster Loan?

SBA disaster loans have been in existence for years, and they are usually provided to businesses that face economic losses due to natural disasters.

Since the coronavirus has been considered a pandemic, businesses who have faced economic turmoil as a result of COVID-19 are eligible for this relief.

SBA disaster loans can offer your business up to $2 million at a 3.75% interest rate. While these loans offer eCommerce businesses more freedom when it comes to what they can spend the money on, they require $25,000 in collateral and they must be paid in full within 30 years.

How can I use SBA Disaster Loan money?

SBA disaster loans can be used for any and everything that you need in order to keep your business operational during the COVID-19 pandemic.

Do I qualify for an SBA Disaster Loan?

Typically in order to qualify for an SBA disaster loan, your business cannot have any additional sources of credit.

Applying for SBA Disaster Loans

Applying for an SBA disaster loan requires far more information than what is needed for a PPP loan. Here are the steps for applying for an SBA disaster loan:

  • Visit the Small Business Association website HERE to apply
  • Prepare the following documents:
    • 2019 annual income statement
    • 2020 monthly income statements through February
    • Most recent Federal income tax returns for any stakeholders with more than 20% ownership of your business
    • All pre-existing debts
    • Business name, location, SSN, EIN and/or TIN, contact information
    • Personal history and financial statement

The SBA will use these documents to determine how much they will be able to loan your business.

What will happen if I cannot repay my SBA Disaster Loan

While it is unclear how this will work with the COVID-19 disaster, in order to receive any loan forgiveness, your business must be shut down, and the SBA will work with you and your bank to see how much you are able to repay.