SBA Loan Programs Under the CARES Act

Overview

EIDL, which is typically available in select states and counties, is now available in every state and county and offers eligible businesses lower interest rates to mitigate substantial economic injury.

Overview

PPP gives eligible businesses the funds to pay most employees their current compensation and benefits for up to 2 ½ months using an SBA §7(a) loan. There is potential full loan forgiveness.

Applications will be accepted through June 30, 2020, or until the funds made available for the PPP are exhausted. Loans will be made available on a first come, first serve basis.

Provider

Available directly through the SBA.

Provider

Available through participating SBA lenders.

TERM AND RATES OF REMAINING LOAN BALANCE

The SBA determines the term of the loan on a case-by-case basis, with a maximum term of thirty (30) years. The interest rate for qualifying small businesses is 3.75%, and the interest rate for qualifying non-profits is 2.75%. Interest rates are not to exceed 4%. Monthly payment deferrals are available for up to one (1) year.

No prepayment penalties apply.

Origination fees are waived.

SBA will waive any personal guarantee on advances below $200,000 for loans made prior to December 31, 2020.

TERM AND RATES OF REMAINING LOAN BALANCE AFTER LOAN FORGIVENESS

The interest rate is one (1) percent with a two (2) year maturity date. The principal and interest is deferred for six (6) months. Interest will accrue on the loan during the deferral period.

No prepayment penalties apply.

Origination fees waived.

These loans are unsecured and do not require personal guarantees.

ELIGIBLE BUSINESSES

Any small business, small agricultural cooperative, and most non-profits in the declared-disaster area are eligible. A small business typically has $750,000 to $36.5 million in total revenue and has anywhere from 500 to 1,500 employees, depending on the industry.  Eligibility is determined based on the Size Standards Tool provided by the SBA.

ELIGIBLE BUSINESSES

1. Any private non-profit organization or public non-profit organization which:
   1. Meets one of the following two criteria:
      1. employs not more than 500 employees whose principal place of residence in the U.S., or
      2. is a business that operates in a certain industry that meets the applicable SBA employee-based size standards for that industry;
   2. has a small business concern; and
   3. was in operation and had paid employees or paid independent contractors as of February 15, 2020.
2. The entity must certify that the uncertainty of the current economic conditions related to COVID-19 make the loan necessary to support ongoing operations of the entity.

COVERED PERIOD

No determination regarding duration of availability.

COVERED PERIOD

February 15, 2020 – December 31, 2020

MAXIMUM LOAN AMOUNT

The SBA office determines the amount of the loan on a case-by-case basis. The SBA’s determination is based on the gross profits information provided on the application. The maximum loan amount available is $2,000,000.00.

Maximum Loan Amount

Maximum loan amount available is the lesser of:

1. [(aggregate payroll costs incurred during the one (1) year period before the loan is made for employees who live in the U.S. – compensation paid to employees in excess of an annual salary of $100,000 per year) / 12]= monthly payroll costs. [monthly payroll costs x 2.5] + [any outstanding amount of prior EIDL loans made between January 31, 2020 to the date the new loan is refinanced – any EIDL “advance”] = Amount of the Loan; or
2. $10,000,000.00

** Alternative calculation applies to (i) companies that were not in business during period beginning on February 15, 2019 and ending on June 30, 2019 and (ii) seasonal employers.

refinancing opportunities for EXISTING eidl loans

EIDL loans made after January 31, 2020 may be refinanced in the covered period through the PPP.

REFINANCING OPPORTUNITIES FOR EXISTING EIDL LOANS

EIDL loans made after January 31, 2020 may be refinanced in the covered period through the PPP.

ALLOWABLE USES OF FUNDS 

Payment of fixed debts, payroll, employee benefits, accounts payable, and other bills that otherwise could not be paid due to economic hardships caused by or related to COVID-19.

ALLOWABLE USES OF FUNDS

1. Payroll Costs:
   1. Employee salaries, wages, commissions, and similar compensation (compensation for an individual employee in excess of an annual salary of $100,00 is prorated)
   2. Paid vacation, sick, medical, or family leave (except FFCRA leave);
   3. Allowance for separation or dismissal;
   4. Costs related to the continuation of group health care benefits, including insurance premiums and retirement; and
   5. State and local taxes assessed on compensation of employees.
2. Interest (not principal) payments of “Mortgage Obligations”;
3. Rent payments;
4. Utilities;
5. Any other debt obligations that were incurred before February 15, 2020; and
6. Costs of refinancing SBA EIDL loan issued between January 31, 2020 and April 3, 2020 to a PPP loan.

POTENTIAL LOAN FORGIVENESS

No loan forgiveness is available.

POTENTIAL LOAN FORGIVENESS

Borrowers are eligible for forgiveness of the full amount of the loan and accrued interest for costs incurred and payments made during the 8-week period after the origination date of the PPP loan for:

1. Payroll costs;
2. Any payment of interest (not principal) on any covered “Mortgage obligation” outstanding as of February 15, 2020;
3. Any payment of rent on a lease in place as of February 15, 2020; and
4. Any covered utility payment for services that began prior to February 15, 2020.

*seventy-five (75) percent of the loan forgiveness amount must be attributed to payroll costs.