The Small Business Administration (SBA) was providing various loans to small businesses suffering as a result of the COVID-19 pandemic. As such, two programs are being actively sought by small business owners to keep their business afloat and running. Small businesses are businesses with few employees including sole proprietorships, independent contractors, a tribal small business, and private non-profits.
Program 1: Economic Injury Disaster Loan (EID Loan)
Under this program, small businesses and nonprofits throughout the United States can apply for up to $10,000 emergency forgivable advance within three days of submitting the application. The working capital is provided to overcome the temporary loss of revenue for the business. Actual amounts provided are based on the circumstances of the business financial loss. The covered period for said loan is January 31, 2020 through December 31, 2020. The interest rate for this loan is 3.75% for small businesses, and 2.75% for nonprofits.
You do not have to repay any amounts of the $10,000 advance, even if the application is later denied, so long as the grant funds are used for: (A) providing paid sick leave to employees unable to work due to the direct effect of COVID-19, (B) maintain 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 interrupted supply chains, (D) making rent or mortgage payments; and (E) repaying obligations that cannot be met due to revenue losses. The filing deadline for this loan is December 31, 2020. Please contact our offices for further assistance and timely submission of the application. The filing deadline for this loan is December 31, 2020. Please contact our offices for further assistance and timely submission of the application.
B. Program 2: Payback Protection Program (PPP)
Under this program, small businesses and nonprofits throughout the United States can apply for up to 2.5x the borrowers average monthly. This program is a first come, first serve basis. Businesses were permitted to start applying on April 3, 2020. The government has provided a list of the lenders who are authorized to make the 7(a) loans. Business with less than 500 employees or an individual who operates a sole proprietorship or an independent contractor and it had W-2 employees or 1099-MISC independent contractors. Subject to certain conditions, this loan will only be forgiven if the funds provided are spent within 8 weeks and used for (A) payroll costs (salary, wages, commission), (B) interest on mortgage obligations, (C) rent or leasing agreement, (D) payments on utilities (electric, gas, water, transportation, internet), (E) tipped employees additional wages. Further, at least 75 percent of the PPP loan proceeds shall be used for payroll costs.
Payrolls are capped at $100,000 annualized for each employee. Important Caveat: A borrower that receives assistance under Economic Injury Disaster Loan (EID Loan) to pay payroll and provide payroll support is NOT ELIGIBLE to file through the Payback Protection Program (PPP) for payroll support.