SMALL BUSINESS LOANS
There are two loan programs for small business available as part of the federal government’s response to Covid-19. If you are interested in either program, it is important to get your application in very soon as the funds available are limited.
Here is a short description of each program and a link to more information and the application forms.
PAYCHECK PROTECTION PROGRAM (PPP)
For businesses with 500 or less employees and in operation on 2/15/2020 new modified loans are made available through the SBA. The amount of the loan is limited to the lesser of $10 million or 2.5 times the borrower’s average total monthly payroll costs. The application period ends June 30, 2020.
The loan proceeds may be used for payroll costs (as defined), employee benefits and commissions, interest payments on mortgages, rent, utilities, and interest on debt incurred before 2/15/2020.
No collateral is required with a maximum interest rate of 4% and a maximum term of 10 years. While interest will accrue from the day the loan is made, no interest or principal payments are required for a 6-12 month period of time. The loan may be paid off at anytime without prepayment penalties.
The PPP loan has a forgiveness provision allowing the borrower to apply for loan forgiveness in an amount equal to the payroll costs, rent, utilities, and interest paid on mortgages during the 8 weeks after the loan is made. The amount of forgiveness will not be taxable to the borrower, but the taxpayer may not use both the loan and the employee retention tax credit.
Contact your bank for an appointment to submit your application and for other specific processing information.
ECONOMIC INJURY DISASTER LOAN (EIDL)
The program currently allows for emergency loans of up to $2M to assist companies affected by COVID-19. The new law waives the requirement for personal guarantees on loans under $200K, it also waives the requirement that the borrower not be able to obtain credit elsewhere, and provide emergency grants of up to $10K within 3 days of the borrower filing an application, though the amount of the grant would reduce any loan forgiveness under the PPP. The law also streamlines the loan application process.
If you are wondering how the new law may benefit you, or for assistance in the application process, please contact our office for a virtual appointment.