Perhaps no single provision in the CARES Act has received more interest from business owners than the Paycheck Protection Program, a partially forgivable loan program offered through the SBA.
These loans MUST be applied for by June 30th 2020 and can have a maximum maturity of 10 years, depending on what they are used for.
Businesses, including sole proprietors, that have fewer than 500 employees. Eligible borrowers are required to make a good-faith certification that the loan is necessary due to the economic uncertainty caused by COVID-19.
Loans up to a maximum of the lesser or $10MM, OR 2.5x the average monthly payroll costs over the previous 12 months.
Paying a variety of costs including:
- Payroll costs
- Group health Insurance premiums
- Salaries/or commissions
- 1099’s paid to contract workers
- Mortgage Interest
WHAT IS FORGIVEN
A portion of the loan is forgiven is the amount spent, during the first 8 weeks after the loan is used for the above expenses.
WHAT'S THE CATCH?
In order for the above amounts to be forgiven, the business must maintain the same number of employees in 8 weeks following the date of origination of the loan as it did from either 2/15/2019 through 06/20/19 OR from 1/1/2020 through 2/29/2020.
Any employees laid off must be re-hired to qualify.
Finally, the maximum interest rate that can be charged for a loan made under this program is 4%. Small businesses tend to be risky borrowers, so the ability to borrow up to $10MM at no more than 10%, and over a term of 10 years can be pretty significant for any small business!
Economic Injury Disaster Loans (EIDL) - The $10,000 Emergency Grant
Another extremely important benefit of this Bill is the EIDL. These loans aren’t new. They’ve always been available in the event of a disaster. However this is the first time a virus or pandemic event has been defined as a disaster.
Because of that declaration, businesses in every state are now eligible to apply for the Economic Injury Disaster Loans- and you should!
WHAT ARE THEY
- Loans up to $2MM
- Term is 30 years
- Interest Rates are 3.75% for small businesses and 2.75% for non-profits
- The first months payment are deferred a full year from the date of the note
WHAT IS THE $10k GRANT
Borrowers can receive $10,000 in an emergency grant cash advance that can be forgiven if spend on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or re-paying obligations that cannot be met due to revenue loss.
Applicants can get he emergency cash even if they don’t qualify for the additional funds. These qualifications are based on self-certification and your credit score- it is our understanding these $10,000 grants are received by applicants after 3 business days.
Where to APPLY
You can apply for these loans directly through the SBA at www.SBA.gov/disaster. Make sure to apply for the Economic Injury for the Coronavirus, rather than “physical damage due to another disaster" label.
WHEN WILL I GET MY MONEY
Unfortunately there is not a definitive timeline from application to approval on these loans. There are some 30 million small businesses in the U.S and given the high unemployment numbers that have just come out, there will be a lot of demand for this relief.
Our advice? APPLY NOW. Don't wait.
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