Businesses with 500 or fewer employees, sole-proprietors, independent contractors, and self-employed workers. A loan applicant must certify in good faith (a) that current economic conditions make the loan necessary to support ongoing operations; (b) that the funds will be used for a permissible use (see below); and (c) that the borrower has no other SBA loan or loan application pending.
COVID-19 Small Business Financing Relief Options
As your financial partner, we have created this resource page to make you aware of the CARES Act program that will allow you to get access to additional capital from the SBA to help weather the COVID-19 storm. The application process is designed to take less than 15 minutes to complete. Included below is essential information you need to know to get started.
The CARES Act
The federal government is making available $349 billion in Paycheck Protection Loans for small and mid-sized businesses to help them get through the crisis caused by COVID-19. Congress has also expanded the existing SBA Economic Injury Disaster Loan Program to ease the process for COVID-19 related disaster loans. Both programs are administered by the U. S. Small Business Administration or SBA. The SBA sets standards for SBA approved lenders that actually make the loans and guarantees a portion of those loans. In the case of Paycheck Protection Loans, Congress has delegated the authority to make and approve the loans to the lenders themselves in order to expedite the process. Expansion Capital Group is not an approved SBA lender.
Paycheck Protection Loans
Paycheck Protection Loans may be used for the following purposes: (a) payroll costs; continuation of healthcare benefits and insurance premiums; (c) Employee compensations; (d) Rent; (e) Interest on a mortgage obligation; (f) Utilities; and (g) Interest on other debt obligations incurred before February 15,2020.
The maximum amount for each business is based on its payroll. Basically, the maximum is 250% of the average monthly payroll costs for the one-year period preceding the loan application date. The calculation method is nuanced and details will be provided as a part of the application process.
The maximum interest rate on a Paycheck Protection Loan is 1% per year. The maximum maturity is 2 years from the date that the borrower applies for loan forgiveness (see below). A lender must allow a borrower to delay payments of principal, interest and fees for at least six months.
A portion of the Paycheck Protection Loan may be forgiven. Basically, a portion of funds spent on payroll, mortgage interest, rent payments, and utilities may be credited against loan principal, depending on employee retention and salary reduction practices of the borrower.The calculation method is nuanced and details will be provided as a part of the application process.
June 30, 2020
NOTE: as currently drafted, applicants will be disqualified from receiving forgivable loans under this bill if they have already successfully applied for an SBA disaster loan (or other SBA relief related to COVID-19 – see below). So, to the extent you wish to apply for a forgivable loan under this bill, do not accept any SBA disaster relief loans at this time. If you have a disaster loan application pending with the SBA, you’re likely fine, provided you do not accept that pending loan.
SBA Portal: Click Here
Economic Injury Disaster Loan (“EIDL”)
Business with 500 or fewer employees, sole proprietors, and independent contractors are eligible, but must be one of the following:
Eligible entities may qualify for loans up to $2 million based upon size, type of business and amount of economic injury.
The interest rates are 3.75% for small businesses and 2.75% for nonprofit organizations. Terms up to 30 years, based on borrowers ability to repay.
Personal guarantees not required for amounts loaned under $200,000. No requirement that an applicant show that it was unable to obtain credit from another source. No pledge of collateral is required for loans of $25,000 or less. If an applicant does not have collateral, the SBA will decide whether to waive the requirement and extend the loan on a case-by-case basis. Lenders are allowed to approve applicants based solely on credit scores (no tax return submission required) or “alternative appropriate methods to determine an applicant’s ability to repay.” The SBA will waive both the requirement that an applicant be in business for at least one year before the disaster and the requirement that the applicant be unable to obtain credit elsewhere.
Under this program, the SBA loan approval will specify the permitted uses for the individual loan. These working capital loans may usually be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. The loans are not intended to replace lost sales or profits or for expansion.
Emergency EIDL Grant
Entities applying for loans under the Disaster Loan Program in response to COVID-19 may, during the covered period, may request an emergency advance from the Administrator of up to $10,000, which does not have to be repaid, even if the loan application is later denied. The Administrator is charged with verifying an applicant’s eligibility by accepting a “self-certification.” Advances are to be awarded within three days of an application.
Emergency EIDL Grants may be used for the following purposes: (a) providing sick leave to employees unable to work due to the direct effect of COVID-19; (b) Maintaining payroll to retain employees during business disruptions or substantial slowdowns; (c) Meeting increased costs to obtain materials unavailable from the applicant’s original source due to supply chain interruptions; (d) Making rent or mortgage payments; and (e) Repaying obligations that cannot be met due to revenue losses.
Economic Injury Disaster Loan SBA Economic Injury Disaster Loan (EIDL) FAQ
A: Any business that is affected by COVID-19, has less than 500 employees and was in operation before February 1, 2020, is eligible to apply.
A: Apply online with a simple application by clicking here. Click Here
A: Your business may receive a loan for up $2million. The amount of the loan will depend on a variety of factors (i.e. loss in revenue, payroll costs, rent payments, etc.)
A: For loans of $25,000 or less, there are no application or processing fees. For all loans greater than $25,000 there will be a $100 processing fee that will be added to the amount of the loan.
A: The interest rate is 2.75% for non-profit entities and 3.75% for for-profit entities.
A: Loan terms are up to 30 years.
A: Repayment start 12 months from the disbursement date of the loan.
A: You may use the loan proceeds for any of the following: payroll costs, salaries, sick leave, rent or mortgage payments, material costs, and pre-existing debt.
A: No collateral is required for loans less than $25,000. Collateral is required for loans $25,000 or greater; however, there is no specific collateral required. A blanket UCC- 1 will be filed for all business collateral.
A: The SBA may approve an applicant based solely on the credit score and shall not require an applicant to submit a tax return or a tax return transcript for approval.
A: Eligible businesses may be eligible to apply for a advance of up to $10,000 that may be requested immediately. There is no requirement to repay the advance even if your business is denied for the SBA Disaster Loan.
A: Any business that is eligible to apply for the SBA Disaster Loan, small business concerns, private nonprofit organizations, and small agricultural cooperatives.
A: The business can use the funds to pay sick leave for employees who are unable to work due to a direct effect of COVID-19, payroll, materials, rent or mortgage payments, repaying outstanding obligations.
A: The program ends on December 31, 2020.