As everyone knows the entire world is currently facing an unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak. In an attempt to help businesses,The CARES Act was signed into law March 27, 2020 in the US, which provides over $370 billion dollars in funding for American small businesses and employees. Out of this came multiple avenues of funding for businesses through the SBA or Small Business Administration.
EIDL 10k Loan advance
The first relief program is the Economic Injury Disaster Loan Emergency Advance. This advance is for any small business owners in the U.S. currently experiencing a temporary loss of revenue due to the COVID-19 pandemic. The application is on the sba.gov website and if a business applies they will receive the Economic Injury Disaster Loan advance of up to $10,000. The $10,000 is supposed to be available in days time after submitting an application and there is no need to pay it back. The amounts over 10k will be the SBA loan to help a business that has lost income because of the Covid-19 pandemic.
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19.
You can also watch the video blog of this at https://youtu.be/CZUR8F1cPPM
Paycheck Protection Program
The Paycheck Protection Program is a loan designed to motivate small businesses to keep their workers on the payroll. Any small business with less than 500 employees this includes sole proprietorships, independent contractors and other self-employed people, private non-profit organizations or 501(c)(19) veterans organizations affected by coronavirus/COVID-19. This program right now is not for independent contractors. That is an ongoing conversation so that will be addressed on its own, since it will be its own program from everything I’m seeing.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers.
SBA will forgive these loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. One important detail is at least 75% of the forgiven amount must have been used for payroll. Which makes sense if you want to get small businesses to keep people employed and on payroll. The loan forgiveness is based on maintaining or quickly rehiring your employees. When rehired you can not reduce their pay or salary you need to maintain the current salary levels. Forgiveness amount will be reduced if the full-time headcount declines, or if salaries and wages decrease. The loan has a maturity time of 2 years and an interest rate of 1% .
There were 10 million people who applied for unemployment insurance so far. This program is to help get those individuals rehired and not have to file unemployment claims. If your business fired employees after February 15th this should be used to get those people rehired quickly. If you are an employee that was laid off be sure to inform your employer about this program as well. You do need to apply at any existing SBA 7(a) lender or through any FDIC insured bank or credit union. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Based on the current demand most major banks are having issues keeping up. The applications just opened on April 3rd, and most major banks are still not prepared. First check with the largest bank you currently have your accounts with.
You can also watch the video blog of this at https://youtu.be/3kBDptMIIAO
SBA Debt Relief
For businesses who are already in an SBA loan the SBA have relief options for them as well.
The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months.
The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.
For current SBA Serviced Disaster (Home and Business) Loans: If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020. The deferral of the payments does not mean the amounts are forgiven. The Interest will continue to accrue on the loan taken out from the SBA. The deferment will NOT cancel any scheduled or recurring payments on your existing loans. If you are a business that needs to defer payments, you are responsible for canceling those automatic payments. After the automatic deferment period, borrowers will be required to resume making regular principal and interest payments. Plan ahead to reestablish the recurring payments.
SBA Express Bridge Loans
Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for a decision and disbursement on an Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan. This loan like the Paycheck Protection Program is also taking into account what you receive from the Economic Injury Disaster Loan. The 25k you receive will be repaid in full or in part by proceeds from the EIDL loan.
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