Updated Resources and Checklists for Navigating the New Federal Emergency Loan Programs
As a follow up, we are attaching links to some additional resources concerning the new Small Business Association disaster loan programs. While these programs are often described in recent media as one collective program, there are actually several interrelated relief programs, some of which provide forgivable loans and some of which require repayment in whole or in part. Please read these materials carefully so that you can assess the pros and cons of each program as they relate to your situation.
The first resource is a link to a guide and checklist prepared by the U.S. Chamber of Commerce for those considering applying for one or more of the new federal emergency loans available through the SBA and it can be accessed for download here:
Additional resources from the SBA that provide overviews of the separate component programs that were added or modified by the new CARES Act are available here:
For the Paycheck Protection Program loans, the amount available under this loan is generally calculated based on your average monthly payroll. The amount for each loan will be capped at two months of your average monthly payroll costs last year plus an additional 25% of that amount, up to a max of $10 million. There are limitations and specific requirements for the forgiveness component of this program. Employers are going to have to make a hard decision regarding layoffs and/or wage reductions if they intend to meet the criteria for forgiveness under this loan program. There is a very real possibility that these loans will not cover the actual cost of retaining employees if this situation extends beyond a few months and the loans are not increased proportionately. Also, you should note there are limits as to executive/management level salaries in the computation of loan amounts. Additional details for the Paycheck Protection Program can be downloaded from the U.S. Treasury Department website here: https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf.
For the COVID-19 Economic Injury Disaster Loan and Loan Advance component, this is a modified version of the SBA’s prior Economic Injury Disaster Loan program. It now has a Loan Advance component that will expedite (within three days of successful application) an advance of up to $10,000 that does not have to be repaid. This loan is available up to a max of $2 million for working capital. Additional details for the COVID-19 Economic Injury Disaster Loan and Loan Advance program can be accessed through the SBA website here: https://www.sba.gov/disaster-assistance/coronavirus-covid-19
These loans will be processed by local banks. If you are interest in applying, after you have applied with the SBA, check with your bank to see if it is going to offer these SBA backed loans. They probably do not have this set up yet because the information they need from the SBA probably has not been received yet. But your bank probably has decided whether to offer these loans or not. If not, start calling other banks now.
Please do not hesitate to call us if you would like any further information or assistance.