If your small business has suffered losses due to the COVID-19 (coronavirus) pandemic, you may be eligible for assistance—including loans—through the U.S. Small Business Administration (SBA).

 

In late March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act earmarked nearly $350 billion to help small businesses keep workers employed during the COVID-19 pandemic and associated economic downturn. This program—The Paycheck Protection Program (PPP)—provides 100% federally guaranteed loans to small businesses. The best part is that if you maintain your business’s payroll during the crisis or restore it once businesses are back up and running, you may not need to pay back the loan.

 

CARES Act Receives Additional Funds

For many small businesses, the first round of PPP assistance quickly ran out of funds before they could participate. In late April, Congress passed supplemental funding in the form of the Paycheck Protection Program Increase Act of 2020. This legislation amends the CARES Act and raises the appropriation level for PPP loans to $670 billion.

 

In addition to bolstering the PPP, the bill also allocated an additional $50 billion for the Disaster Loans Program, an additional $10 billion in Emergency EIDL Grants, and an additional $2.1 billion more to the Salaries and Expenses account through Sept. 30, 2021. The measure also enables agricultural companies (as defined by section 18(b) of the Small Business Act) with fewer than 500 employees to receive EIDL grants and loans.

What You Need to Know About the Paycheck Protection Program (PPP)

The PPP is designed to incentivize small business owners to keep their employees on payroll during the COVID-19 crisis. If you, as a small business owner, apply for and are approved for the loan, the SBA may forgive the loan if all of your employees are kept on the payroll for eight weeks—and if the money is used to cover payroll, rent, mortgage interest, or utilities.

 

Here are the highlights:

  • You can borrow up to $10 million (up to 2.5 times your monthly payroll and specific operating costs).

  •  After 8 weeks, you can begin the approval process for loan forgiveness (for which you’ll need to submit 2 months of expenses with supporting documentation).

  • Payments for unforgiven loans will be deferred for six months.

  • The loan has a maturity of 2 years and, as of April 2020, an interest rate of 1%.

  • No collateral or personal guarantees are required.

  • No fees will be charged by lenders or the federal government.

  • You can apply through any existing SBA 7(a) lender or any participating federally insured depository institution, federally insured credit union, or Farm Credit System lender.

It’s important to note that loan forgiveness depends on whether your business maintains or quickly rehires employees and maintains salary levels. Forgiveness will be reduced if your number of full-time employees decreases or if payroll (salaries and wages) decrease.

Am I Eligible for the PPP?

The following COVID-19-affected business entities are eligible:

  • Any small business that meets the SBA’s size standards (either the industry-based sized standard or the alternative size standard)

  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans’ organization, or Tribal business concern with 500 or fewer employees or a business that meets the SBA industry size standard if more than 500 employees

  • Any business with a NAICS Code that starts with 72 (Accommodations and Food Services) with more than one location and less than 500 employees per location

  • Sole proprietors, independent contractors, and those who are self-employed

More information:

SBA Economic Injury Disaster Loans

The SBA also is offering low-interest federal disaster loans for working capital to small businesses that are experiencing substantial economic damage due to COVID-19. With this latest round of funding, the administration will resume processing the EIDL Loan and Advance applications it has already received on a first-come, first-served basis.

 

Loan highlights:

  • Up to $2 million in assistance is available to small businesses to help bridge the temporary loss of revenue due to the pandemic.

  • Loans can be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid due to the crisis.

  • Loans carry an interest rate of 3.75% for small businesses and 2.75% for non-profit organizations.

  • There are long-term repayment options up to a maximum of 30 years.

The application portal is currently closed to new applicants—but check back frequently.

SBA Bridge Loans

SBA’s Express Bridge Loan Pilot Program allows small businesses who already have a business relationship with an SBA Express Lender to quickly access up to $25,000. If your small business has an urgent need for cash while you wait to hear about your pending Economic Injury Disaster Loan application, you may qualify for an express disaster bridge loan.

 

Loan highlights:

  • Small businesses can apply for up to $25,000.

  • The program promises a fast application turnaround.

  • Loans will be repaid in full or in part by proceeds you receive from an EIDL loan.

SBA Loan Debt Relief

Qualifying for additional SBA debt assistance:

  • For loans not on deferment, the SBA will start making payments beginning with the next payment due on the loan and will make six monthly payments.

  • For loans currently on deferment, the SBA will start making payments beginning with the next payment due after the deferment period has ended, and will make six monthly payments.

  • For loans made after March 27, 2020, and fully disbursed prior to September 27, 2020, the SBA will start making payments with the first payment due on the loan and will make six monthly payments.

Borrowers do not need to apply for this assistance; it will begin automatically.

 

We know that this is a trying time for small businesses. You are not alone. If your business has been affected by COVID-19, several federal loan programs can help you keep your employees on your payroll and recoup losses you have sustained. To learn about other types of available loans, read Where to find financial relief for your small business during COVID-19.

 

 

Thanks for reading our article posted on April 28, 2020. Please note that this content is intended for educational purposes only. As COVID-19 laws and funding change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. See more small business resources or check your current rate in 3 minutes.

Get a quote in 3 minutes

Save up to 30% on workers' compensation for your small business.