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SBA Loan Paths

he Small Business Administration “SBA” is offering 2 paths to aid small businesses during this time

 Path 1 – Coronavirus Aid, Relief, and Economic Security Act (“Cares Act”)

  • Banks not SBA makes the loan – contact your local banks
  • Max Loan Amount is 2.5 times average total monthly payroll costs incurred in the one year period before the loan is made
  • Loan Forgiveness:  The amount of the loan that is forgivable is the total of the payroll costs, mortgage interest payment, rent, and utilities incurred or paid by the borrower during the 8-week period beginning on the loan origination date

o   Reducing your staff or employee wages between 2/15 and 3/16 will reduce the amount of the loan that can be forgiven.  You can rehire and readjust the wages by 6/30 to still receive full loan forgiveness

  • Loan term not to exceed 10 years and at an interest rate of no more than 4%
  • No Collateral or Personal Guarantee is permitted to be required for the loan.
  • No prepayment penalty
  • Deadline to apply is June 30, 2020
  •   There are very few borrower requirements to qualify for a loan.  Those requirements include good faith verification that:
    1. The loan is needed to continue operations during the COVID-19 emergency.
    2. Funds will be used to retain workers and maintain payroll or make mortgage, lease and utility payments
  • Other restrictions may apply, this is all brand new
  • As of 9:30 am, March 30, 2020, local Banks are still awaiting final procedures from SBA to implement this new program

Path 2 – SBA Economic Injury Disaster Relief Loan (“EIDL”)

  • SBA processes the loan and you will need to apply online through SBA website

o   https://disasterloan.sba.gov/ela/information/eidlloans

  •  You can get up to a $10,000 grant to cover immediate payroll, mortgage, rent, and other specified expenses. This grant does not have to be repaid
  • interest rate of no more than 4%
  • Loan processing time much longer

 

Suggestions for financial assistance

  • Move forward with Path 1 Cares Act but still apply for both methods.  You can qualify for both paths at the same time
  • Have Tax Returns, Income Statements, bank statements ready
  • When calling into your bank ask for the SBA servicing department
  • There will be many businesses requesting help so be persistent and keep checking with the banks
  • Consult your attorney or CPA for more information
SBA Paychecks Protection Program
Essential Workers Letter