COVID-19 Business Resources For Gym Owners
Know that this situation changes daily, even hourly, so this article was up-to-date at the time it was written and is meant to serve as a catalyst for you to find out more from your own legal and financial team. While the author is an attorney licensed in Louisiana and Mississippi, please do not construe this article as legal advice.
Small Business Resources for Gyms
If your gym is formally organized through the Secretary of State in your state and has under 500 employees, then the United States government considers you a small business. The designation of a small business allows your organization to apply for numerous loans, grants, and programs.
SBA Disaster Loan
A small business like your gym operation has the opportunity to receive $2 million in assistance via a loan from the Small Business Administration (SBA) to provide economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. You must use the funds to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses and 2.75% for non-profits, which some weightlifting facilities operate under. Long term repayments are available in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay. The SBA has authorized lenders to defer pre-existing SBA loan payments for up to six months. However, this is at the discretion of the lender, so don't automatically assume it is going to happen.
Pre-COVID-19 SBA loans still available for small businesses include:
- The 7(a) program offers loan amounts up to $5,000,000 and is an all-inclusive loan program deployed by lending partners for eligible small businesses within the U.S. and its territories. The uses of proceeds include: working capital; expansion/renovation; new construction; purchase of land or buildings; purchase of equipment, fixtures; lease-hold improvements; refinancing debt for compelling reasons; seasonal line of credit; inventory; or starting a business.
- The Express loan program provides loans up to $350,000 for no more than seven years with an option to revolve. There is a turnaround time of 36 hours for approval or denial of a completed application. The uses of proceeds are the same as the standard 7(a) loan.
- The Community Advantage loan pilot program allows mission-based lenders to assist small businesses in underserved markets with a maximum loan size of $250,000. The uses of proceeds are the same as the standard 7(a) loan.
- The 504 loan program is designed to foster economic development and job creation and/or retention. The eligible use of proceeds is limited to the acquisition or eligible refinance of fixed assets.
- The Microloan program involves making loans through nonprofit lending organizations to underserved markets. Authorized use of loan proceeds includes working capital, supplies, machinery & equipment, and fixtures (but does not include real estate). The maximum loan amount is $50,000, with the average loan size of $14,000.
- Women-owned Small Business via www.sba.gov/wosbready or write to wosb@sba.gov.
Economic Injury Disaster Loans (EIDL)
Under the CARES Act, the federal government, through the SBA, passed legislation to allow small businesses to receive an economic loan due to COVID-19. Qualified businesses include those with under 500 employees, sole proprietorships, independent contractors, 504(c)(6). EIDL offers a loan at a rate of 2.75% for nonprofits and 3.75% for other entities with a deferred repayment option. You must use a qualified SBA lender; most banks are partnering with approved lenders to help their customers navigate this situation.
Should you qualify for this loan and use the bridge loan of $10,000 to cover immediate costs such as rent, utilities (internet, phone, water, etc.), then that amount can be forgiven. You cannot use the funds to fund any expansions, lost revenue or lost profits. But you can use it to "keep your doors open" to help with working capital needs like recurring expenses (fixed debt, accounts payable). This resource requires a credit history check and they look at your ability to repay all loans. If you request over $25,000, then collateral is required. Real estate, your gym equipment, and anything asset in the gym’s name can be used as collateral. You must provide all documentation requested within seven days of that request (forms include SBA Form 5, IRS Form 4506T, Federal Tax Returns (if you don't have that, then look at using your year-end Profit And Loss Statement).
Two important things to note with regards to EIDL: (1) You cannot have both the SBA Disaster Loan and an EIDL, and (2), if there was a change in ownership of more than 50% after March 27,2020 without a contract showing the sale was negotiated and began prior to that date, then your organization is excluded from being eligible for an EIDL.
Payroll Protection Program
Payroll Protection Program is available for businesses with less than 500 employees, sole proprietors, the self-employed, and independent contractors. This plan allows any business that was operating on February 15, 2020 to apply for a loan to cover qualified expenses in order to maintain payroll. Independent contractor salaries or hourly rates can be included in this loan. It caps payroll per person at $100,000 and does not apply to employees with a principal residence outside of the United States. The end-goal here is to allow companies to pay their employees. If the business uses 75% of the funds for payroll, then the "loan" converts to a grant. This means you do not have pay back the government. However, keep meticulous records because if you do not use the funds appropriately then the loan must be paid back at .5%.
This program will take your payroll costs and multiply it by 2.5 in order to generate what amount your organization may be eligible to receive It differs from EIDL insofar as no personal guarantee is required, no collateral or credit check is required, and it can be FORGIVEN if used on appropriate expenses (payroll, health benefits, rent, utilities) within eight weeks of receipt. If you are a sole proprietor or self-employed, and you were on the payroll, then you can apply for PPP. The government is going to be looking to see if you have paid into social security. You can apply for PPP directly with your bank or