Small Business Guide To Financing Relief During COVID-19

covid-19 business relief

SBA Disaster Loans

The SBA Economic Injury and Disaster Loan is available to all the states throughout the country for any business needing access to capital to cover needs brought by the Coronavirus pandemic.

For those businesses that qualify, this loan is a great option as it has no upfront fees or early payment penalties and the repayment term is set depending on the current ability of the business to repay the loan. Loan terms are up to 30 years.

According to the SBA the interest rate will not exceed 4% per year.

For-profit companies: 3.75%  and for non-profit companies: 2.75%

For those interested in applying, you can submit an online application.

SBA (7b) Economic Injury Disaster Loan (EIDL)

Loan Overview:

The 7(b) loans provide up to $2 million in assistance with an interest rate of 3.75% for-profit companies and an interest rate of 2.75% for non-profits. The loan terms range up to 30 years, and there are no upfront fees or early payment penalties.

Loan information:

  • Payments start 12 months after the date of the contract
  • Funds can be used to business expenses such as pay sick leave for employees who are unable to work due to a direct effect of COVID-19, payroll, materials, rent or mortgage payments, repaying outstanding obligations

Eligibility requirements:

Loans for any business that is affected by COVID-19, has less than 500 employees and was in operation before February 1, 2020, is eligible to apply.

Those interested in applying, must apply before December 31, 2020

Emergency Advance up to $10,000

Advance information:

  • There is no requirement to repay the advance even if your business is denied the 7(b) loan
  • Funds can be used to pay business expenses such as pay sick leave for employees who are unable to work due to a direct effect of COVID-19, payroll, materials, rent or mortgage payments, repaying outstanding obligations

Eligibility requirements:

An eligible small business must apply for the 7(b) loan in order to request the Emergency Advance of up to $10,000

Those interested in applying, must apply before December 31, 2020

 Click here to apply.

SBA (7a) Paycheck Protection Program

This is your typical SBA loan which assists small businesses in covering operating expenses. A business can use 7(a) loan proceeds to pay-off a 7(b) Disaster loan. Please note, a business can have both a 7(a) and 7(b) loan at the same time.

Loan Overview:

  • The PPP provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. The fund can also be used to pay interest on mortgages, rent and utilities.
    • Payroll costs are capped at $100,000 on an annualized basis for each employee
  • Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible to apply. Businesses with more than 500 employees are eligible in certain industries.
  • A business can apply for a loan of 2.5 average monthly payroll costs up to $10million
  • Term up to 2 years
  • Interest Rate: 0.5%
  • Loan payments will be deferred for 6 months
  • No personal guarantee or collateral is required
  • Neither the government nor lenders will charge small businesses any fees
  • An eligible business must apply before June 30, 2020
  • A business is eligible to apply even if the small business is applying to other relief programs
  • No prepayment penalties or fees

A7(a) loan forgiveness:

  • Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll) Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease
  • Loan forgiveness may be reduced if:
    • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount
    • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019
    • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020
  • In order to request loan forgiveness:
    • A small business can submit a forgiveness request to its lender that is servicing the loan
    • Request should include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations
    • Certification that the documents are true and that the business used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments
    • The lender must make a decision on the forgiveness within 60 days

Application Process:

Starting April 3, 2020, small businesses and sole proprietorships can start applying. Starting April 10, 2020, independent contractors and self-employed individuals can apply. There is a funding cap, so it is in the small businesses best interest to apply as quickly as possible.

A small business can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Additional lenders should be available in the near future to assist in making the loans. A small business should consult with its local lender to see whether or not that lender is enrolled in the program.

Aside from the application, a small business will need to provide its lender with payroll documentation

Sample Application:

Borrower FAQ

For more information visit the SBA Website

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