COVID-19 Resources for Startups
TLDR: COVID-19 has put unprecedented stress on global health systems and the economy, but a variety of public and private institutions are offering resources and developing tools to try and help businesses. We have compiled a list of resources on our website to help startups navigate these uncertain times—from guidance on protecting the health and safety of teams, to information about accessing federal economic relief.
What’s Happening This Week: U.S. workers and companies of all sizes are continuing to deal with the economic fallout from the COVID-19 pandemic. As more states issue stay-at-home orders to their residents, businesses are struggling with how to maintain their operations amidst all of the uncertainty.
While the $2 trillion stimulus package signed into law last week will provide some short-term relief to small businesses, gig workers, and other entrepreneurs, many startups are wondering how they can leverage the available resources—financial or otherwise—to protect their workers and companies.
As companies continue to evaluate their needs and financial situations moving forward, we wanted to provide startups and other entrepreneurs with a readily accessible resource for them to use at this difficult time. That’s why, earlier today, we released a guide—”COVID-19 Resources for Startups”—to help answer some of the startup community’s most immediate and pressing questions.
Why it Matters to Startups: Many American workers and companies are struggling right now, but our nation’s small businesses, gig workers, and startups in particular need to receive immediate support and financial security to weather the ongoing pandemic. That’s why it’s so critical that startups and entrepreneurs have easy access to the available resources, guides, and tools that they need to keep their companies above water.
In particular, a main concern for startups right now is how they can continue to support a healthy and productive work environment during a global health crisis. The Centers for Disease Control and Prevention has a page dedicated specifically to businesses and employers. The CDC’s guidance addresses reducing transmission of COVID-19, maintaining business operations, social distancing strategies, workplace hygiene, and travel restrictions and alternatives.
With many states and cities also having instituted stay-at-home or shelter-in-place orders, it’s a good time for startups to evaluate their ability to coordinate with remote teams and workers. Harvard Business Review and Gallup have advice for businesses managing newly remote workers, and NPR also has tips for workers who have suddenly found themselves working from home. A number of firms also offer video conferencing software (including some that are free) that can help streamline communication at this time. More information on these resources can be found on our website.
Although Congress has already passed several COVID-19 relief packages—most recently the $2 trillion Coronavirus Aid, Relief, and Economic Security (“CARES”) Act—many startups are uncertain of how they can take advantage of the billions of dollars set aside for small business loans. The Small Business Administration’s website now lists COVID-19 loan resources, and the Senate Small Business Committee Guide to the CARES Act also summarizes major provisions of the law that are relevant to small businesses.
Some of these include the Paycheck Protection Program Loans, which can be used for payroll, rent, mortgage interest, or utilities. Loan payments will be deferred, and for recipients who comply with certain requirements—maintaining their workforce and using the funds for covered purposes—a portion of the loan can be forgiven. Importantly, no personal guarantee or collateral is required for the loan. The U.S. Chamber of Commerces prepared a checklist for small businesses interested in these loans.
Congress also recently expanded eligibility and allocated additional funding to the SBA’s Economic Injury Disaster Loans (EIDLs). These loans are designed to help small businesses suffering substantial harm due to COVID-19. Many EIDLs still require a personal guarantee or collateral, but loans of less than $200,000 can be approved without a guarantee. There is a $2 million limit on these loans, and the actual amount of the loan is tied to the borrower’s economic injury. Borrowers can receive a $10,000 advance which should be paid within a few days and can be forgiven (i.e., the advance can effectively be a grant). The SBA further describes the disaster loans in the context of COVID-19 here.
There is a significant concern, however, that many startups will be excluded from these loan programs. When determining eligibility, under the “affiliation rules” the SBA requires each applicant to count all the employees of its affiliates as employees of the applicant company. And the definition of an “affiliate” can be very expansive. So while the loan program is available to companies with less than 500 employees, startups who have VC- or PE-backing may have to count all of the employees of the investor (VC or PE firm) and the employees at every company the investor has backed. The National Venture Capital Association’s (“NVCA”) thorough guidance for VC investors explains how the SBA rule works.
Beyond these concerns, however, startups have access to some federal tax programs and credits to support their employees. Congress provided for tax relief in its COVID-19 aid packages, including employer tax credits for paid leave, an employee retention tax credit, and delayed payroll tax credits.
We have a variety of additional resources in our “COVID-19 Resources for Startups” guide to help firms navigate this difficult period. We will also be updating the page as the outbreak continues to unfold. It’s an uncertain and stressful time for workers and companies, and we want to provide all of the resources and support that we can to support entrepreneurs and startups through the COVID-19 pandemic.
