Emergency COVID-19 Small Business Assistance: Federal Loan Programs

The Small Business Administration is providing relief for businesses harmed by the COVID-19 pandemic. The funding available for small businesses is unprecedented in the history of the United States of America. The funding will take the form of low interest federally guaranteed loans. Under certain conditions, some or all of the loans may be forgiven. The SBA defines eligibility as having a business with 500 or fewer employees (with certain exceptions for hospitality and restaurant industries). Under the SBA guidelines, sole-proprietors, independent contractors and self-employed individuals also qualify.

There are two programs under which small business can qualify for loans: The Paycheck Protection Program and the Emergency Economic Injury Disaster Loan.

Paycheck Protection Program:

The Paycheck Protection Program will provide loans equal to 2 ½ times your monthly payroll expenses including group health care benefits, insurance premiums, and retirement contributions, limited to an annual rate of $100,000.00 per employee. The purpose of this loan is to support small businesses that retain their employees on payroll. This loan may also be used to pay for utilities, rent, and mortgage interest. In order to qualify, the business must have been operational as of February 15, 2020, had employees (or independent contractors) and paid salaries and payroll taxes. The businesses must also establish their good faith need for relief during this pandemic.

The interest rate for this loan is capped at 4%. No personal guaranty or collateral is required. If the borrower doesn’t reduce the number of its employees, or employee compensation by more than 25%, this loan will be forgiven, in effect becoming a grant. For the loan forgiveness, the amount you spend (as allowable use) during the first eight (8) weeks from loan origination, will be forgiven from the loan amount. The remaining balance of the loan will have a ten (10) year loan term with no prepayment penalty. Application and funding is said to begin by next week.

We realize that many of you may have limited or no access to your business premises, further, your accountant and pay roll companies may likewise not have access to their physical files. Therefore, start to identify and compile your corporate documents and reach out to us to discuss next steps, including a comprehensive list of what may be required to begin and expedite your application.

Emergency Economic Injury Disaster Loan (EIDL):

Emergency Economic Injury Disaster Loans (EIDL) are also available to small business. These are loans of up to $2 million and are available to pay expenses that could have been met had the disaster not occurred. Upon submission of an application, the small business is eligible for an Emergency Economic Injury Grant of up to $10,000.00, which is required to be distributed to the applicant within three (3) days. The Emergency Economic Injury Grant does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments. The EIDL can be up to $2 million and is based on demonstrated need. The EIDL has a 3.75% interest rate, payable over 30 years. The SBA will waive any personal guarantee on advances and loans below $200,000.00. Please feel free to contact us for further information on EIDL and how it may fulfill your immediate business needs.

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