SBA Coronavirus (COVID-19) Relief Options

SBA Economic Injury Disaster Loan 

• Low interest federal disaster loans for working capital for small business suffering substantial economic injury due to the COVID-19 crisis.  There is no loan forgiveness for these loans but they are 100% guaranteed by the federal government and no longer require personal guarantees by the owners.
• Loans will be issued up to $2M each at 3.75% interest (2.75% for not-for-profit entities).
• Long repayment terms up to max of 30 years, determined on a case by case basis based on each borrower’s ability to repay.
• Loans may be used to pay fixed debts, payroll, AP and other bills.   
• Application steps:

-Using the link above, submit the initial high level application.  You may opt in for a $10K advance that is not repayable even if you do not get approved for the loan, essentially making this a grant.  This advance will be based on the applicant’s 20%+ owners’ credit history.

-A loan officer will request additional documentation in the weeks following the initial application to determine eligibility and loan amount.  Applicants should have the following prepared and ready to submit when requested (all forms can be found on the SBA site):

-IRS Form 4506-T for each principal owning 20% or more of the business each general partner or managing member and, for any owner who has more than a 50%ownership in an affiliate business.

-Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business; an explanation if not available.

-Personal Financial Statement (SBA Form 413) completed, signed and dated by the applicant (if a sole proprietorship), each principal owning 20% or more of the applicant business, each general partner or managing member.

-Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used).

-Other information may be requested such as personal federal income tax returns for each principal owning 20% or more of the business, a current year to date profit and loss statement, and Additional Filing Requirements (SBA Form 1368) providing monthly sales figures.

-Once approved, the SBA will send loan closing docs and an initial disbursements will be made within 5 days of receipt of signed docs.  Initial disbursement will be $25K for economic injury working capital.  Subsequent disbursements will be scheduled with the assigned Case Manager until the full amount is disbursed.

Paycheck Protection Program (PPP)

• All businesses, including not for profits, veterans organizations, tribal business concerns, sole proprietorships, self employed individuals and independent contractors with 500 or fewer employees can apply.
• Loan amount is based on 2.5x average monthly payroll costs for the prior 12 months; for new businesses the period of 1/1/20 – 2/29/20 will be used for the calculation.  Payroll costs include:

-Salary, wages, commissions or tips, capped at $100K annualized per employee

-Employee benefits costs including PTO, medical, or sick leave, group healthcare benefits premiums and any retirement benefits

-State and local taxes assessed on compensation

-Note that 1099 independent contractor costs may NOT be included in this calculation as they can apply for their own PPP starting 4/10/20.  This is a revision to the original guidance that was issued!

• Loan will be forgiven if the proceeds are used to pay payroll costs, mortgage interest, rent, and utilities during the 8-week period following loan origination. 

-Note that businesses must maintain both headcount and salaries for forgiveness; amount of loan forgiveness will be reduced proportionally by:

-Any decreases in headcount; 

-Any decreases salaries in excess of 25% for any employee that made less than $100K annualized

-Businesses that laid off employees between 2/15/20 – 4/26/20 can rehire those employees without being penalized for the reduced wages

• Any amounts not forgiven will carry a 0.50% fixed interest rate, with 6 months payment deferral.  The loan is due in full after 2 years.
• Note that applicants that are approved for the PPP will NOT also qualify for the various payroll tax credit and deferral programs also being provided for under the CARES act.
• Application process:

-Apply directly through a SBA-approved lender (application is available at the above link).  Check with your banker whether your business banking provider is a lender as many want to have an operating account open in conjunction with the loan and may have other requirements. 

-Applications may be submitted starting April 3, 2020 for small business and sole proprietorships (see application attached). 

-Independent contractors and self-employed individuals can apply starting April 10, 2020.

-You will need to provide your lender with payroll documentation evidencing your payroll figures.

-Submit loan forgiveness requests directly to the lender servicing the loan.