What Grants and Loans Are Available to Family Child Care Providers?
Update: April 23, 2020: Congress has just passed a law putting new money into these programs. Family child care providers should apply now.
Do you need money because you have lost income or are shut down? There are two new federal programs that allow you to receive thousands of dollars in free money through the Small Business Administration (SBA).
These include the:
Economic Injury Disaster Loan (EIDL)
Paycheck Protection Program (PPP)
This article covers the Economic Injury Disaster Loan (EIDL) program. My next article will cover the Paycheck Protection Program.
Economic Injury Disaster Loan (EIDL)
Family child care providers can receive a loan advance of up to $10,000 that does not have to be repaid!
Providers are eligible for the EIDL through the Small Business Administration.
You can receive $10,000 as an emergency cash advance that can be forgiven if it’s spent on mortgage or lease payments or for repaying debts that can not be met because of a loss of income. They can also be used to pay your employees.
Recent SBA guidelines have limited the EIDL loan to $1,000 per employee. You can be counted as an employee.
You can apply now to get this money! Ask for $10,000. You can also ask for more later. Amounts above $10,000 would have to repaid at a 3.75% interest rate.
Here are some ways you can use this money:
If you own your home and your monthly mortgage payment (principal plus interest) is $2,000 and your Time-Space Percentage is 30%, you can use this $10,000 to pay 16.6 months of mortgage payments ($2,000 x 30% = $600 x 16.6 months = $10,000).
If you rent and your monthly rental payment is $1,000 a month and your Time-Space Percentage is 40%, you can cover 25 months of rent ($1,000 x 40% = $400 x 25 months = $10,000).
If you pay an employee $500 a week, you can cover 20 weeks of wages.
How do I apply?
You apply online through the SBA. You do not have to talk to a banker. Your loan can be approved based solely on your credit score. Fill out an online application form through the SBA. Here is a link to this form:
Here's how to fill out the form.
First Screen - Disclosures
On the first screen, check the box that you are self-employed, otherwise check the box if you are a business with not more than 500 employees.
Check all the other boxes that don’t apply to you.
Second Screen – Business Information
Business Legal Name: If you have a legal name, enter it. Otherwise, enter your own name.
Trade name: Enter “Family child care”
EIN/SSN for Sole Proprietorship: Enter your Employer Identification Number (EIN) or your Social Security number.
Organization Type: Choose sole proprietorship unless you are established under one of the various other options.
Is the Applicant a Non-Profit Organization?: Enter “no” unless you are.
Is the Applicant a Franchise?: Enter “no.”
Gross Revenues for the Twelve (12) Months Prior to the Date of the Disaster (January 31, 2020): Use your gross income from your 2019 Schedule C, line 7.
Cost of Goods Sold for the Twelve (12) Months Prior to the Date of the Disaster (January 31, 2020): Enter zero. You have no cost of goods. If you did enter cost of goods on your 2019 Schedule C, Part III, enter it here.
Rental Property: Leave blank unless you own rental property (not your home).
Non-Profit Cost of Operation…: Leave blank.
Combined Annual Operating Expenses…: Leave blank.
List the Secular Social Services Provided by the Faith Based Entity: Leave blank.
Compensation From Other Sources Received as a Result of the Disaster: List any funds received from the Paycheck Protection Program (PPP) or other state grants or loans. See my article about PPP.
Provide Brief Description of Other Compensation Sources: List other sources, if any.
Primary Business Address and other information: Complete
Business Activity: Enter “Educational Services”
Detailed Business Activity: Enter “Daycare”
Number of Employees:
Enter 1 for yourself, plus any other employees you have
Third Screen -Business Owners Information
Is Your Business Owned by a Business Entity?: Answer “No”
Enter information about yourself
Ownership Percent: Enter 100
Fourth Screen - Additional Information
Check the appropriate boxes in the first section.
Enter the name and contact information of anyone else who helped you complete this application.
Check the box that says, “I would like to be considered for an advance of up to $10,000.”
Enter the name of your bank, your account number and your routing number. Your routing number is the 9-digit number in the lower left-hand corner of your check. The account number is the 12-digit number immediately to the right of your routing number. Don’t add the last numbers on the end of your account number that represent your current check number.
Check the box that says your application information is true.
The SBA may ask you for additional information. They may ask for your 2019 tax return if filed (or if not, your 2018 tax return). You may also need a year-to-date profit and loss statement. Basically, a profit and loss statement shows your monthly income and expenses.
If you need help in filling out this application form, you may call the SBA at 1-800-659-2955 or email disastercustomerservice@sba.gov. Whether you fill out the online application form or contact the SBA by phone or email, you may have to wait a while for your application to be processed during this crisis. This is a frustrating time for everyone, so you will probably have to be patient.
This loan program may require collateral if you borrow more than $25,000. There is no prepayment penalty. The interest rate is 3.75% for up to 30 years on any money you borrow in excess of $10,000. The first month’s payments are deferred for a year. You won’t need to make a personal guarantee or provide any real estate collateral. But, remember, you won’t have to pay back the first $10,000 under this program!
Note: However, you should be cautious about taking out any loan at 3.75% interest unless you are fully aware of the amount of interest you will have to pay over the life of the loan. Will you be in a position to make the monthly payments on the loan after the first year? Don’t get yourself into debt unless you absolutely need the loan and you are in a strong financial position to pay it back.
This loan program has been around for many years and was available for taxpayers who lived in a designated disaster area. President Trump has declared the entire country a disaster area, so these loans are now available to all businesses, including family child care providers. You must have been in business by January 31, 2020 to qualify for this program.
You can apply for the both Paycheck Protection Program and the EIDL loan program. However, you can’t use the money for the same thing. If you receive both, the amount you will get from the EIDL program will be reduced, unless the funds are used for different purposes.
Unemployment
If you receive unemployment benefits and then receive EIDL funds, this will likely mean you are no longer eligible for unemployment for a period of time. Check with your state unemployment office to see if your unemployment benefits will be suspended for the week your receive the EIDL or for longer.
What the states are doing
Some states are offering their own loan or grant programs. Here are a few I’ve identified:
Michigan: Offers a Small Business Relief Program
Minnesota: Offers Peacetime Emergency Child Care Grants
North Dakota: Offers Operating Grants
Philadelphia, Pennsylvania: COVID-19 Small Business Relief Fund
More states may be offering financial assistance to family child care providers in the coming weeks. Check with your Governor’s office or Child Care Resource and Referral agency.
Tom Copeland - www.tomcopelandblog.com
Image credit: SBA
