Below are the facts business owners need to know about the SBA and Federal Reserve assistance available. We’re here to help; set a meeting and we will get back to you within 24 hours to answer your questions.
Emergency Assistance for Businesses with 500* Employees or Less
In order to help Small and Medium Size Businesses (SMBs) operate and pay employees during the COVID-19 pandemic, the government is rolling out massive assistance to SMBs. These steps include the Payroll Protection Program loan equal to 2.5 months of payroll that may not need to be repaid. A business can apply for both a PPP loan and the Economic Injury Disaster Loan (EIDL) loan, as long as the EIDL is used for a different purpose than paying payroll costs, health insurance, interest, mortgage, rent utilities. The EIDL can be used to pay accounts payable and other costs and for “meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains.
Main Street Loan Facility to SMBs for Businesses up to 10,000 employees
- Eligible Borrowers are businesses with up to 10,000 employees or up to 2.5 billion in annual revenues
- Must be US companies or companies with majority of its employees based in the US
- 4 year maturity
- Amortization of principal and interest deferred for one year
- Adjustable rate of SOFR (Secured Overnight Financing Rate) +250-400 basis points
- Minimum loan size of $1 million
- Maximum loan size of $25 million or 4x 2019 EBITDA
- No prepayment penalty
- Can’t be used to pay down other debt
- Must make reasonable effort to retain employees over the term of the loan
Final rules and regulations are expected by next week. To prepare, gather all information necessary to complete SBA Form 7(a) application or an equivalent form.
What to Do Now
We’re recommending that you:
- Contact your local bank or an approved SBA lender and get an appointment as soon as possible.
- Prepare for your appointment by gathering all the documentation required to complete the Payroll Protection Program forms.
- Payroll records for 2019 and the first two months of 2020
- Forms 941, 940 and W-2s
- Consider also applying for an SBA Emergency Injury Disaster Loan EIDL SBA Form 5. Economic Injury Disaster Loan (EIDL) loan, as long as the EIDL is used for a different purpose than paying payroll costs, health insurance, interest, mortgage, rent utilities. The EIDL can be used to pay accounts payable and other costs and for “meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains.”
Comparison of the PPP (Payroll Protection Program) and EIDL (Economic Injury Disaster Loan)
How much cash can you get?
EIDL: Up to $2 million
PPP: Up to $10 million, or 2.5 times your total payroll expenses for the loan period
Loan interest rate:
EIDL: 3.75 percent. Interest rate on the loans will not exceed 4 percent per year and terms will not exceed 30 years.
PPP: The initial rate is 0.5 percent, but it may rise. It is capped at 4 percent.
EIDL: No, but first $10,000 is a grant.
PPP: Yes. Forgiveness covering the first eight weeks of the loan is possible if employers pay their expenses and maintain – or quickly rehire – employees and keep salary levels constant. Seventy-five percent of the amount given must be put toward payroll.
Can you apply for multiple SBA loans?
Yes, as long as the loans are being put to different uses. If you have an existing disaster relief loan through the SBA, it is possible to roll that loan into a PPP loan and have it forgiven as the program allows.
Where to apply for multiple SBA loans?
PPP: Through any existing SBA 7(a) lender or 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.
Other Assistance Included in the CARES ACT
- Employer-side payroll tax credits or deferral to eligible businesses paying Covid-19 related sick leave and FMLA leave
- Small dollar Emergency EIDL grants of $10,000 or less
- Subsidies for existing SBA loan payments, payment deferments as well as extended maturities
- Early withdrawal penalties for IRA and Retirement Plan withdrawals up to $100,000 are waived if related to Covid-19
- Favorable changes to bankruptcy rules
- Favorable changes to net operating loss rules
- Favorable changes to the excess business interest rules