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SBA/federal help that you can begin today

With the passage of the CARES act, our local Small Business Administration representative has outlined bullet-pointed details to help you understand what it could mean to your business. Though information is in flux, you can take action today to receive benefits this month.
 
Paycheck Protection Program (nothing has been determined. This is possible parameters)

  • Paycheck Protection Program, the Small Business Administration (“SBA”) has the authority to provide 100% federally backed loans through December 31, 2020 to help eligible businesses pay operational costs such as payroll, rent, and utilities
  • If a business satisfies certain conditions, portions of the loans are forgivable.
  • Loan made through SBA Preferred lenders and other lenders that are being added soon
  • SBA guarantees 100% of the loan
  • Includes full-time, part-time and any other status
  • Coverage period 2/15/20 – 6/30/20
  • Based on average total monthly payroll costs incurred during the one-year period before the date of the loan
  • Could receive up to 2.5 times its average monthly payroll costs subject to a $10 million limitation
  • Not included in calculation:
    • individual employee compensation over $100,000;
    • payroll and income taxes;
    • compensation for an employee with a principal place of residence outside the United States; and
    • qualified sick leave or family leave wages for which a business will receive a credit under the Families First Coronavirus Response Act.
  • Use of proceeds:
    • payroll costs;
    • cost related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
    • employee salaries;
    • interest payments on any mortgage;
    • rent and utility payments; and
    • interest payments on any other debt obligations that were incurred before February 15, 2020
  • Amount of forgiveness cannot exceed the principal amount of the loan, but may equal up to a business’s costs during the 8 weeks following the date of the loan’s origination for the following categories:
    • Payroll costs;
    • Interest on real or personal property mortgage obligations in existence before February 15, 2020 and incurred in the ordinary course;
    • Rent under a lease agreement in force before February 15, 2020; and
    • Utility payments, including electricity, gas, water, transportation, telephone or internet, for which service began before February 15, 2020.
  • No Collateral or Personal Guarantee
  • Loan Fees waived. 
  • Deferral of Payments from 6 months to a year
  • No Prepayment Penalties. 
  • Maximum Rate and Term:  4% and 10 years
  • A business obtaining a loan through the Paycheck Protection Program will not be able to use the payroll tax credits available under the Families First Coronavirus Act for employee retention or the deferral of employer-side social security payroll taxes under the CARES Act.
  • Loan will be through an SBA Preferred Lender and others that will be “approved” soon.
  • No portal or application is yet available.
  • For now, start calculations on the criteria listed above
 
 
Economic Injury Disaster Loan (EIDL) https://covid19relief.sba.gov/#/ and https://www.sba.gov/disaster/apply-for-disaster-loan/index.html
  • Only for small business owners (check NAICS for size requirements on Census.gov)
  • Loan made directly from SBA
  • Private non-profits
  • SBA will look at VERY loosely:
  • Credit
  • Repayment abilities
  • Collateral:  under $25k loan, no need for collateral
  • $2M limit per business, even those that have multiple locations, it will still probably be a $2M limit
  • 3.75% small business interest rate; 2.75% to private non profits
  • All loans will be for 30 years
  • Can be paid off early with no penalties
  • Loan payments deferred for 12 months
  • SBA Form 5 is for businesses, SBA Form 5C. is for Sole Props
 
Economic Injury Disaster Loan Advance
  • Up to $10,000
  • Made available within 3 days of successful application
  • DOESN’T HAVE TO BE REPAID
 
SBA Bridge Loan
  • Up to $25,000
  • 7 year term
  • Expires 9/30/20
  • SBA guarantee is 50%
  • Made through SBA preferred lender that has already been doing Bridge Loans
  • Eligible small businesses must already have a relationship with the lender
 
Loan Forgiveness
  • Businesses that qualify for a small business loan under section 7(a) of the Small Business may qualify for loan forgiveness on portions of their SBA disaster loan.
  • The borrowers that qualify for small business loans will be eligible to have only those portions of their loans forgiven for the amounts spent during an 8-week period after the origination date of the loan for payments related to the following expenses:
    • Payroll costs
    • Interest payments on a mortgage if the mortgage was incurred prior to February 15, 2020 (does not include principal or prepayment)
    • Rent payments under a lease that was in effect prior to February 15, 2020
    • Utility payments made on utility services if such services were in use prior to February 15, 2020
  • There are certain limits on the amount of forgiveness for which the loan will not be forgiven, which include the following:
    • Amounts in excess of the principal on the loan will not be forgiven.
    • Forgiveness will be reduced proportionately by any reduction in employees retained compared to either (i) the prior year, or (ii) the period of January 1, 2020, thru February 29, 2020 (measured based on average employees per month).
    • Forgiveness will be reduced proportionately by any reduction in pay of any employee beyond 25% of their prior year compensation (measured from the most recent full quarter prior to the origination date of the loan).
    • Payroll costs eligible for forgiveness do not include compensation paid to employees in excess of $100,000 annually.
  • If the business has “tipped employees,” the business may receive forgiveness for additional wages paid to those employees.
  • If borrowers re-hire workers that have already been laid off due to COVID-19 (within 30 days of the enactment of the CARES Act), they will not be penalized or have the loan forgiveness reduced by any reduction of employees or reduction in payments to employees, so long as the workers are re-hired on or before June 30, 2020.
  • Any loan amounts that are not forgiven at the end of one year is carried forward for a max term of 10 years at max interest rate of 4%, and the 100% loan guarantee remains during the term.
 
 
SBA Debt Relief
The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis.
Under this program:
  • The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
  • The SBA will pay the principal and interest of current 7(a) loans for a period of six months.
  • Contact your lender on this

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