Everything we know about the loan and grant programs available for small businesses.
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Economic Impact Disaster Loan (EIDL) + Loan Advance
Payroll Protection Program
SBA Debt Relief
Economic Impact Disaster Loan (EIDL) + Loan Advance
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.
What is EIDL used for?
EIDLs are lower interest loans of up to $2 million, with principal and interest deferment at the Administrator’s discretion, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.
Who is an eligible?
- Sole proprietorships, with or without employees
- Independent contractors
- Cooperatives and employee owned businesses
- Tribal small business
- Small business concerns and small agricultural cooperatives that meet the applicable size standard for SBA are also eligible, as well as most private non-profits of any size.
What are the loan terms?
- Up to $2m
- Payback period is 15-30 years
- Interest rate is 3.75%
The application form and process to apply for the EIDL, including the $10,000 cash advance option, was recently updated. To make things easy for our friends and clients, we recorded a quick step-by-step video on how to apply for this loan.
Payroll Protection Program (PPP) Loan
The Paycheck Protection Program, often simply referred to as PPP.
It comes from Title 1 of the Cares Act of 2020 ”Keeping American Workers Employed and Paid”.
The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.
Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.
Under this program:
- Eligible recipients may qualify for a loan up to $10 million, determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
- SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
- Loan payments will be deferred for six months.
- If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
- This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
What should I have ready for the PPP application?
- Fill out the PPP form
- On April 3rd, submit the form (the government link for the PPP page is here; this page should either host the portal or link you to it)
- Have documentation proving revenue / expenses prior to February 15th, 2020
- Key documents
– Gather your company EIN or TIN number
– 2017 taxes
– 2018 taxes
- 2019 taxes (if not complete yet, 2019 Profit and loss broken down by month will work)
- Lenders will request documents to verify
– Full-time equivalent employees on payroll
– dollar amounts of payroll costs
– covered mortgage interest payments
– covered rent payments
– covered utilities for the eight week period starting when you get this loan
- Stay in contact with your local SBA office
SBA Debt Relief
For those with new and existing SBA 7A and SBA 504 Loans. The SBA will not debt your monthly payment from your account and this amount will be forgiven.
SBA website currently has the following text, however we have confirmed that it does include the SBA 504 loan as well. Contact your SBA lender or CDC for more information.
- The SBA will pay the principal, interest, and fees of current 7(a) loans for a period of six months.
- The SBA will also pay the principal, interest, and fees of new 7(a) loans issued prior to September 27, 2020.
Frequently Asked Questions for the PPP
1. What are the key dates for PPP?
- Lenders can process PPP on April 3rd (be ready); there should be a portal also to submit docs (this government page should point you to it)
- Loans available through June 30, 2020
2. What are the details for PPP?
PPP has a host of attractive features, such as forgiveness of up to 8 weeks of payroll based on employee retention and salary levels, no SBA fees, and at least six months of deferral with maximum deferrals of up to a year.
3. Who is eligible?
- Business must have been in operation on February 15th, 2020 (This program would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls)
- Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher.
- Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.
- Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72, for which the affiliation rules are waived.
4. What is the loan size?
- Your max loan is equal to 250% of your average monthly payroll costs (up to $10,000,000)
- For purposes of calculating “Average Monthly Payroll”, most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee. For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee.
Jan 2019 – Dec 2019 Payroll (12 months) = $1.2mn
Avg. Monthly Payroll Expense = $1.2mn / 12 = $100k
Loan (2.5x Avg. Monthly Payroll) = 2.5 x $100k = $250k
- If you took out an EIDL between February 15, 2020 – June 30, 2020, and you want to refinance the loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.
5. What is eligible for payroll (and loan proceeds)?
- Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment required for the provisions of group health care benefits, including insurance premiums
- Payment of any retirement benefit
- Payment of State or local tax assessed on compensation of employees
- Payroll costs (as noted above)
- Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
- Employee salaries, commissions, or similar compensations (see exclusions above)
- Payments of interest on any mortgage obligation (which shall not include any Prepayment of or payment of principal on a mortgage obligation)
- Rent (including rent under a lease agreement)
- Interest on any other debt obligations that were incurred before the covered period
6. Who is NOT eligible for payroll?
- Employee/owner compensation over $100,000
- Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
- Compensation of employees whose principal place of residence is outside of the U.S.
- Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act
7. What are the loan terms?
For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee (SBA will establish application fees caps for lenders that charge)
8. How is loan forgiveness calculated?
You must apply through your lender for forgiveness on your loan. In this application, you must include:
- Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings.
- Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.
- Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.
9. Can I get more than one PPP loan?
No, an entity is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number (TIN) at SBA to prevent multiple loans to the same entity.
Would you like to discuss your specific needs?
Give us a call or shoot us a message. We look forward to serving you!