[UPDATED: 4-27-2020]
For businesses, there are many relief provisions to consider as a result of the COVID-19 pandemic. Each can help your organization in different ways. From loans to loan forgiveness and emergency grants, it is important to understand your options and how to apply for relief.
Please review a brief description below of the choices you and your business have as of April 1, 2020. We understand that there are many facets to these relief options and we are here for you, paying close attention to the details in order to maximize the potential benefits.
Small Business Administration COVID-19 Economic Injury Disaster Loan and Emergency Grant
The Small Business Administration’s (SBA’s) Economic Injury Disaster Loans (EIDLs) are a provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing working capital for small businesses, small agricultural cooperatives, employee stock ownership plans and nonprofits that cannot meet their ordinary and necessary financial obligations (i.e. debts, payroll, accounts payable and other bills) as a result of the COVID-19 disaster.
Through the program, entities with less than 500 employees, including sole proprietors and independent contractors, can apply immediately for a $10,000 emergency grant to be paid within three days, even if they do not qualify for additional funds. This grant must be spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments, or repaying obligations that cannot be met due to revenue loss.
The EIDLs can be up to $2 million, with up to a 30-year term with fixed interest rate set by the law, ranging from 2.75 to 3.75 percent. EIDLs can be approved by the SBA based solely on an applicant’s credit score (not repayment ability and no tax return is required), and delayed repayment options are available. The SBA can require the borrower to pledge collateral and obtain and maintain appropriate hazard insurance for the life of the loan on the property pledged as collateral.
We strongly encourage you to apply for the loan now. Even if later you decide you do not want to take the loan, you can reject it at that time.
Again, any business can sign up for the $10,000 grant directly through the SBA and it takes less than 20 minutes to complete the application. After you receive your confirmation number, you should expect the SBA to be contacted within seven to 10 days.
Apply directly on the SBA website.
SBA Application
Paycheck Protection Program
The CARES Act’s Paycheck Protection Program (PPP) Loan Guarantee is another aid option for businesses with less than 500 employees. Starting April 3, 2020, small businesses, nonprofits, and sole proprietorships can apply to receive loans that cover their payroll and other certain expenses through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply.
Loan amounts can be made for up to two months of your average monthly payroll costs from the last year plus an additional 25 percent of that amount, capped at $10 million and $100,000 annualized for each employee. Amounts spent during the first eight weeks from loan origination may be forgiven based on the following terms:
- Your workforce remains consistent.
- Funds are used for qualified expenses such as payroll, insurance, rent and mortgage interest.
Any unforgiven portion of the loan will have a six-month payment deferral period.
We encourage you to apply for this loan with your local financial institution as soon as you are able. You will need to provide your lender with payroll documentation. No personal guarantee is required.
PPP Guide PPP Application PPP FAQ Calculation Guidance
Additional Considerations
You can have both loans at the same time; you just are not able to use them for the same expenses. Therefore, organizations need to review the expenses they have and determine how much financing is needed and what the best source for it is.
If you get a $10,000 emergency grant and then are accepted for a PPP loan, the $10,000 grant will be subtracted from the PPP loan amount.
Stay Informed
New details on these relief programs seem to be revealed daily. We will keep updated dated information about the business relief described in this article right here. If you have questions you would like to talk through, please contact one of our business advisors.
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