Loans Available to Businesses Affected by COVID-19
There are two new SBA loan options available to businesses impacted by the current health emergency:
Paycheck Protection Program (PPP)
- All businesses with fewer than 500 employees are eligible to apply starting April 3, 2020.
- This loan is obtained through banks and other lenders that normally issue SBA-backed loans.
- The loan amount is limited to 2.5 times your monthly average payroll costs.
- Some or all of this loan can be forgiven. The calculation of the amount forgiven will be based on amounts paid for payroll (compensation is limited to $100,000 per employee), benefits including health insurance and retirement plan contributions, rent, and utilities. Note that payroll costs does not appear to include the employer match for social security and Medicare taxes or amounts paid for federal unemployment taxes. In addition, the forgiven amount may be reduced if your number of employees and/or level of payroll is reduced compared to 2019.
- To the extent the loan is not forgiven, the interest rate is 1% and the loan is payable in full in two years. Payments are deferred for the first six months, however, interest will continue to accrue during this period.
- The forgiven amount will not be included in taxable income.
- You do not need to personally guarantee this loan or pledge collateral.
- For additional information, see borrower guide here
- And the application here
Economic Injury Disaster Loan (EIDL)
- All businesses with fewer than 500 employees who have experienced economic injury due to COVID-19 are eligible to apply. Applications are already being accepted.
- This loan is obtained directly from the SBA – go here to apply.
- No part of this loan will be forgiven. You can obtain loans under both programs but you cannot use the same costs as a basis for both loans.
- The interest rate for EIDL loans is 3.75% for small businesses and the loans have a 30-year term.
- Applicants may request an advance of up to $10,000 on their loan application. If the loan is then denied this amount may not have to be repaid but will be deducted from any loan forgiveness amount calculated for a PPP loan if one is received.
- Personal guarantees are not required for loans up to $200,000. Above that amount these are required by anyone that owns more than 20% of the business. Collateral may be required for loans of more than $25,000.
There are some additional options/programs available:
Please don’t hesitate to call us at 828-232-1130 if you need our help working through these options. We’re here to help!