Small Business Relief Loans

CARES Act V. SBA Disaster Relief

With COVID-19 causing serious disruption to US businesses, a number of programs have been created to assist small businesses with their ongoing expenses. Below is a summary of two loan programs that all small businesses should consider: the CARES Paycheck Protection Program and SBA Economic Injury Disaster Loans. Please reach out to us if you need assistance navigating these programs.

CARES PAYCHECK PROTECTION PROGRAM (“PPP Loans”)
Lender
The PPP loans will be provided by private banks, credit unions, and lenders throughout the United States. The federal government, through the SBA, will guarantee the PPP loans.

Loan Amount
2.5 times your average monthly payroll costs for the one year preceding the loan origination date. So, if you averaged $10,000 in payroll costs each month for the past year, you can obtain a $25,000 PPP loan.

Interest Rate
Determined between you and your private lender, but cannot exceed 4%. This interest will apply only to the balance of the PPP loan which is not forgiven.

Loan Forgiveness
Eligible for loan forgiveness for 8 weeks from the loan origination date, only for amounts spent on payroll costs, rent, mortgage interest, and utilities. Loan forgiveness may be reduced if your payroll or compensation to employees is reduced during the same 8-week period.

Personal Guarantee/Collateral
No personal guarantees or collateral required. However, you must certify that the loan is necessary due to uncertain economic conditions and that you will use the loan to maintain payroll, pay rent, pay mortgage interest, and/or pay utilities.

Authorized Loan Use
Payroll costs, rent, mortgage interest, and utilities. Loan money cannot be used to compensate an employee or contractor in excess of an annual salary of $100,000.

Miscellaneous

Payroll costs include compensation, paid leave, severance, group health benefits including premiums, retirement benefits, and state/local employment taxes.
If a balance remains after loan forgiveness, there is a maximum maturity date of 10 years.
Your business must have been in operation prior to February 15, 2020.
No annual or guarantee fees.
Available until June 30, 2020.
Contact your local bank, credit, or lender about applying.

SBA ECONOMIC INJURY DISASTER LOANS (“EIDLs”)
Lender
The SBA serves as the direct lender of EIDLs. No private banks or lenders are involved.

Loan Amount
SBA will offer you an amount based on your “substantial economic injury” related to COVID-19 going back to January 31, 2020. The maximum loan is $2,000,000.

Interest Rate
3.25% with for-profit businesses. 2.25% with non-profit businesses.

Loan Forgiveness
Applicants may receive a $10,000 emergency advance (within 3 days of applying), which can be for given if spent on paid leave, maintaining payroll, increased costs from supply chain disruption, rent, mortgage interest, or repayment of unmet obligations from lost revenue. This amount will be de ducted from any loan forgiveness under the PPP loan program.

Personal Guarantee/Collateral
No personal guarantees required for EIDL loans up to $200,000. The SBA will provide unsecured EIDL loans under $25,000 and require some form of collateral for EIDL loans over $25,000.

Authorized Loan Use
Working capital, including payment of fixed debts, payroll, accounts payable, and additional bills that you cannot pay because of the impact of COVID-19.

Miscellaneous

EIDLs provide long term repayments, up to a maximum of 30 years.
You must demonstrate an ability to repay the EIDL loan, based principally on your credit score.
Your business must have been in operation for over one year.
Available until December 31, 2020.
Visit the SBA disaster loan website to apply: https://www.sba.gov/disaster-assistance/coronavirus-covid-19

Are you a small business?
Most likely, yes. If you have less than 500 employees, you should be deemed a small business for either a PPP loan or EIDL. Depending on your NAICS code, your businesses may still qualify as a small business if it has more than 500 employees. You can find out for sure at this link: https://www.sba.gov/size-standards/

Can you apply for both PPP loans and EIDLs?
Yes, you can apply for and obtain both types of loans. However, you cannot use proceeds from these loans for the same purpose. In addition, if you have already received an EIDL, you can seek to re-finance the EIDL under the PPP loan program.