What is the COVID-19 economic stimulus package?***
The Coronavirus Aid, Relief, and Economic Security (CARES) Act has now been signed into law. It includes $367 billion in SBA guaranteed loans to help small business owners weather the storm of the current economic crisis resulting from the COVID-19 pandemic.
The objective of the stimulus is to help small businesses stay in business and retain their employees through the COVID-19 crisis. This will ensure that the country emerges from the crisis with very little or no damage to our small business economic base.
Who is eligible for SBA support under the CARES act?
Your company qualifies to apply for any and all of the programs if:
- You have been in business since February 15, 2020, as a sole proprietor, LLC, corporation or a non-profit entity
- You have 500 or fewer employees, and YES, you qualify even if you are self-employed as a sole proprietor with no employees, for as long as you have paid wages and taxes.
What are the key programs in the CARES package?
There are three main programs in the package that you need to be aware of:
- The Paycheck Protection Program (PPP)
- The Economic Injury Disaster Relief Loans (EIDL) program with its associated Emergency Economic Injury Grant
- The Small Business Debt Relief Program.
What is the Paycheck Protection Program?
PPP provides capital of up to $10 million to enable you retain your employees even when they have had to stay home because of the pandemic. It provides a loan of up to 250% of your average monthly payroll costs for the period between February 15, 2019 and June 30, 2019.
If you were not in business during that period, the loan amount will be based on your average payroll costs (actual and projected) between February 15, 2020 and June 30, 2020. The interest rate on PPP is only 4% and payback is 10 years, moreover part or the entire loan may be forgiven if you keep your employees on payroll past June 30, 2020. These loans are only available through June 30, 2020.
What is the Economic Injury Disaster Relief Loans (EIDL) program?
EIDL provides loans of up to $2 million to pay for business expenses that would have been met had not the pandemic occurred. Examples of qualified expenses are interest payment on existing loans, including mortgage loans, rent payments, and utility bills. EIDL may also be used to cover payroll expenses that are not specifically covered in a PPP loan you have applied for.
One other good thing, you can simultaneously apply for a grant of up to $10,000 when you apply for EIDL. This is called the Emergency Economic Injury Grant, which could be paid to you within three days of your EIDL application. This is a quick cash infusion for you to use in covering immediate cash needs that will help you stay in business. These grants are only available from January 31, 2020, to December 31, 2020, and you do not have to repay under any circumstances.
What is the Small Business Debt Relief Program?
SBDR will provide immediate relief to small businesses that already have SBA 7(a) and SBA 504 loans. Under this program, SBA will cover all loan payments including principal, interest, and fees for six months.
Also, new borrowers who take out loans within six months of the passage of the law will be entitled to the same 6-month debt relief. You can obtain a loan of up to $5 million under the SBA 7a program and up to 5.5 million under the SBA 504 program.
How do I access COVID-19 SBA loans?
You can only access an EIDL loan or grant directly from SBA. To apply for those facilities, visit: https://covid19relief.sba.gov/#/. The PPP loans, SBA 7(a) and SBA 504 loans are however available from SBA approved lenders, possibly including your local bank.
We are a commercial loan brokerage firm. We are partnered with SBA preferred banks and non-bank lenders nationwide. We are therefore positioned to work with you no matter where your business is located. We will assist in packaging your application and quickly securing your loan.
Remember that these SBA products are only available for a short period of time. That is why you need our professional services for fast and stress-free access to them. We will help you stay in business during these challenging times and grow your business after the storm is over.
***The above is from information current as of April 2, 2020, and will be updated as new information becomes available from SBA.