Get it Before It’s Gone! A Summary of SBA Loan Programs
While many businesses are struggling to stay afloat due to the effects of forced business closures resulting from the Covid-19 pandemic, there are fortunately several options for business owners to keep their businesses operational.
The following is a summary of the loan programs that are available from the US Small Business Association in partnership with local lenders. Information for this blog was taken from the SBA website. Please check this link for the latest updates, and information on this topic changes rapidly.
Here is a short summary, with more details below on each loan type.
Paycheck Protection Program– This loan program provides loan forgiveness for retaining employees by temporarily expanding the traditional SBA 7(a) loan program.
EIDL Loan Advance- This loan advance will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties.
SBA Express Bridge Loans- Enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly.
SBA Debt Relief- The SBA is providing a financial reprieve to small businesses during the COVID-19 pandemic.
Paycheck Protection Program
U.S. Small Business Administration | SBA.gov
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
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.
As of April 3, 2020, 13,669 PPP loans were approved, and $4.3 billion disbursed of the $349 billion available to small businesses.
You 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. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
Lenders may begin processing loan applications as soon as April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020.
Who Can Apply
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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.
Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.
Loan Details and Forgiveness
The loan will be fully forgiven if the funds are 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). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
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.
This loan has a maturity of 2 years and an interest rate of 1%.
Other Assistance
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are currently eligible to apply for disaster assistance.
Enhanced Debt Relief is also available in SBA’s other business loan programs to help small businesses overcome the challenges created by this health crisis.
For information on additional Lending options, please click here.
SBA provides local assistance via 68 district offices and a nationwide network of resource partners. To find resources near you, please click here.
Lender Forms and Guidance
The Interim Final Rule announcing the Paycheck Protection Program information is being posted in advance of publication in the Federal Register. The official version will appear in the Federal Register.