Keep that “open” sign out and hold on to your employees! You might want to learn about the new SBA programs that are available to most small businesses around the country! Our Government worked hard on creating a stimulus program that will help small businesses during this trying time. Of the $2 trillion dollar stimulus program, there is almost $350 billion dollars that is designated for small businesses.
Who will qualify for these new stimulus programs from the SBA?
Depending on which of the programs you apply for, there are a different set of guidelines for each one. There are two known loan programs that are associated with the COVID-19, the Paycheck Protection Program dubbed “PPP”, and the Economic Injury Disaster Loan Program dubbed “EIDL”. Both have its benefits and both seem very aggressive when reviewing its guidelines. Please keep in mind that there is very little information available for these programs, when our management team reached out to the SBA help desk, they too were not able to answer all of the questions we had for them. So, we will only be able to list the information we’ve learned thus far. If you are in need of some emergency capital, the SBA claims their EIDL has the ability to release funds up to $10,000 in as little as three days! Not only that, but this is considered a grant that is not required to be paid back! Learn more here.(link to our own page I made for this program)
SBA (7a) Paycheck Protection Program (PPP)
This program will be available through June 30, 2020 but it’s very likely they will run out of funds before that date. We would recommend applying as soon as possible. The intent for this program is to help and motivate small businesses keep their employees on their payroll. This is available for small businesses with less than 500 employees (including sole proprietorships, independent contractors, and self-employed persons), private non-profit organizations or 501 (c) (19) veterans organizations affected by the coronavirus/COVID-19. There are other exceptions for companies who might have more than 500 employees, you would need to check the SBA’s website for more information.
The SBA will forgive this loan if you comply with the following for the eight-week period after the loan is originated:
- The loan proceeds are used to cover payroll, rent, mortgage, and utilities, and…
- Employee and compensation levels are maintained
Payroll expenses with a maximum of $100,000 on an annualized basis for each employee. It is very likely this program will have a high demand, and we’re anticipating the maximum amount will not exceed more than 25% of the forgiven amount may be used for non-payroll expenses.
Terms and Loan Sizes
The loan amount can be equal to the total of your average monthly payroll costs from the last 12 months with an additional 25% of the total. The loan payments can be deferred up to 6 months with the interest accruing over this period, and the maximum loan amount is $10 million. The interest rate for this program is at an amazing 0.50% fixed! The loan will be due in 2 years with the option to pay off early at any time without paying a penalty.
Is Collateral Required or Personal Guarantees?
No, there is no collateral required, nor will there be any personal guarantees. In addition, there will be no additional fees from the government or lender.
How much of the loan will be forgiven?
It’s very important you understand how this program works, especially if you are looking to qualify for loan forgiveness. If you are utilizing the loan proceeds for anything other than your payroll costs, mortgage, rent and/or utilities over the eight-week period, you can expect to disqualify yourself from getting this loan forgiven. You will also need to maintain your full-time employees, maintain your salaries (do not decrease your wages more than 25% for any employee that grossed less than $100,000 in 2019), and by June 30, 2020 you must re-hire any employee who was previously employed but let go between the date of February 15, 2020 and April 26, 2020.
If you are considered an “essential business” and you are still operating during this pandemic, please make sure you and your employees are protected from this virus. Be sure to practice social distancing amongst employees and/or customers and clients. The CDC offers some guidance on preparing your workplace for COVID-19, you can read up on it here.
To learn more about the Economic Injury Disaster Loan Program (EIDL) visit our other page that goes over this new program that was recently published by the SBA.
If your company is not in distress, but you are seeking assistance with obtaining equipment for your business, you can still give one of our advisors a call and they can help prequalify you for any of our programs. Please contact us at 888-565-6692.
If you are seeking additional information on either SBAN program, you can visit their site.
Keep Your Employees, Use the SBA Stimulus Program! | First Capital Business Finance