Due to the COVID-19 pandemic and its affects on small businesses, the SBA now has two loans available to help your small business through these unusual and trying times.  Here is a quick summary on the Economic Injury Disaster Loan and the Paycheck Protection Loan.

SBA Economic Injury Disaster Loan 

• Any small business is eligible due to COVID-19.
• Working capital loans used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. They are not meant for business expansion. 
• Up to $2 million
  • Unsecured up to $25,000
  • Need either collateral or a pledge where available.
• Affiliation rules have not been waived
• 3.75% Interest rate; 2.75%-NFP’s
• Loan amount is based on economic injury
• Pay back is up to 30 years with terms determined on a case by case basis based on the borrower’s ability to repay.
• 12-month deferment of paybacks. No prepayment penalty
• The following are ineligible: religious institutions and some other charitable organizations and gambling concerns.
• Approval Criteria:
  • Credit history
  • Ability to repay
  • In a disaster area and suffered working capital losses due to COVID-19.
• Added $10,000 loan advance to be provided within 3 days of application.  This loan advance will not have to be repaid. It is also referred to as a Grant program. 

 SBA “Paycheck Protection” Loan (7(a)) 

• If you are a recipient of the SBA Economic Injury Disaster Relief Loan between January 31, 2020 and March 27, 2020, you are still eligible for this loan.
• Any business who employs not more than 500 employees or, if applicable, the size standard in number of employees established by the SBA for the industry in which the business concern operates.
  • Exception for Accommodation and Food Services (NAICS code beginning with 72).
• Use of funds: payroll costs and benefits, interest on mortgage obligations; rent; utilities; and interest on other outstanding debt. 
• Maximum loan amount is lesser of the average total monthly payments for payroll costs incurred during the 2019 calendar year multiplied by 2.5 and $10,000,000. 
• No collateral or personal guarantee is needed for this covered loan. 7(a) standard fees are waived. 
• Can refinance EIDL loan if that is approved before this loan is completed. 
• Loan forgiveness is available.
• Unforgiven portion of loan will be financed at .5% with maximum 2-year term. 6 month deferment. No prepayment penalty.
• Lenders should be able to start taking loan applications as soon as April 3, 2020 for employers. Self-employed can apply starting April 10, 2020. Application can be found at:  https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

For more information, please contact Stacy Shaw, CPA, at sshaw@myboyum.com