Important Things You Should Know
COVID-19 SBA Response
Questions And Answers
- Economic Injury Disaster Loan¹.
- Paycheck Protection Loan².
- Apply for the Economic Injury Disaster Loan directly from the SBA here.
- Paycheck Protection Loans are government-backed but will come from private banks. You should inquire at your local bank about these loans. The Treasury Department has just released the loan application. You can see it here. You will still need to apply for the loan at your local bank. This is just the application.
- The Economic Injury Disaster Loan from the SBA can be up to $2 million working capital for up to a 30-year term at 3.75% (2.75% non-profits). Not everyone will qualify for that amount.
- The Paycheck Protection Loans can be for 2.5 months of average payroll or $10 million — whichever is less.
- You must repay the Economic Injury Disaster Loan from the SBA. Payments can be deferred for one year after the origin of the loan.
- All or some of the Paycheck Protection Loan may be forgiven (converted into a grant). There are specific requirements about how you spend the loan and if you continue to employ your workers in order for it to be forgiven. Read them here.
- The SBA is offering to advance businesses a $10,000 grant that does not need to be paid back. That grant will be paid quickly — in as little as three days.
- You can apply for that $10,000 grant as part of the Economic Injury Disaster Loan process. If you are awarded the $10,000 emergency grant, you will not have to pay the grant (just the grant) back. You will still have to repay the rest of your SBA Economic Injury Disaster Loan.
- Paycheck Protection Loans are available to 501(c)(3)s, self-employed, sole proprietors and independent contractors.
- SBA Economic Injury Disaster Loans are available to small businesses and non-profits (including faith-based) with fewer than 500 employees, sole proprietors and independent contractors.
- You can apply for and receive both loans.
- The Paycheck Protection Loan requires no collateral and no personal guarantee.
- The Economic Injury Disaster Loans are given based on credit scores. No tax returns are required. You can borrow up to $200,000 without a personal guarantee.
- Your loan may be forgiven if you bring back employees and restore wages generally within 30 days and maintain them through June 30.
We Will Help You Every Step Of The Way
How to Apply for an SBA Economic Injury Disaster Loan¹:
Step 1: Visit the SBA disaster loan website.
Here is the direct link to begin the loan application process: https://covid19relief.sba.gov/#/.
Note: Before entering any personal information, be sure you are on the real Small Business Association site at SBA.gov.
Step 2: Verify eligibility.
The SBA is relying on businesses to self-certify eligibility. This is a two-part verification process:
The first part certifies that your business falls within the parameters of the Economic Injury Disaster Loan (EIDL) Program. Choose the one description that fits your business.
In the second part, you must certify that your business is not engaged in certain disqualifying activities. Review and check each of the boxes before continuing.
Then click the “Continue” button to be taken to the online application.
Step 3: Provide business information.
To complete this step of the online application, you will need several pieces of information pertaining to your business handy, including:
The legal and trade names of your business.
Your Federal EIN number or Social Security number.
Gross revenue and cost of goods sold for the 12 months leading up to January 31, 2020.
The date your business was founded.
The number of employees.
Step 4: Provide business owner(s) information.
At the top of this second page of the application is a question about whether your business is owned by another business entity. If the answer is yes, you will need to provide information about that entity and that entity must sign a loan guarantee.
Regardless of your answer to the first question, you will be asked for information about the owner(s) of the company. There is a separate page for each owner, and the following information per owner is required:
Percentage of business ownership.
Social security number.
Date and place of birth.
Note: That first question at the top is easy to miss. If you’ve filled out all of the lines and can’t go forward, make sure you’ve answered yes or no to that qualifier at the top of the page.
Step 5: Additional information.
This page of the application is broken into sections.
The first section requires answers to questions about criminal history or previous issues regarding dealings with the federal government.
The second section applies to anyone who may have assisted with the filing of the application (paid or unpaid). Fill in the name and contact info of anyone who assisted with your loan application. The SBA also asks for permission to contact the loan preparer.
Before entering the final information, you will be asked if you would like to be considered for a $10,000 advance on your loan. This is the $10,000 grant that is mentioned in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Businesses who request this $10,000 advance on their loan (which is being called a grant) and are approved are expected to receive it within three days. This $10,000 advance does not need to be paid back — though the rest of your disaster assistance loan will need to be paid back.
The last section asks for your bank information where your loan funds and the $10,000 advance, if approved, should be deposited. Once again, be sure you are on the correct site before you enter any banking information. The correct site is: https://covid19relief.sba.gov/#/.
Read the provisions, which state, in part, that additional information may be required, that no one was paid for preferential treatment and that the information provided was truthful. You can read the terms and conditions of the loan here.
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How to Apply for an SBA Paycheck Protection Program Loan²:
The Paycheck Protection Program, one of the largest sections of the CARES Act, sets aside $350 billion in government-backed loans from private banks to help small businesses survive through the coronavirus outbreak. In some cases, these loans can be converted to grants, which means that if you meet certain requirements, you won’t need to pay the loan back.
Here are the most important things small businesses need to know about the Paycheck Protection Program.
How does the Paycheck Protection Program work?
The Paycheck Protection Program’s $350 billion in small business loans will be issued by private banks. Currently, the Small Business Administration (SBA) guarantees loans that are given out by a network of more than 800 lenders across the U.S. The Paycheck Protection Program creates a type of emergency loan that can be forgiven when used to maintain payroll through June. The basic purpose of the Paycheck Protection Program is to incentivize small businesses to not lay off workers and/or to rehire laid-off workers that lost jobs due to COVID-19 disruptions.
What businesses are eligible for these loans?
The Paycheck Protection Program offers loans for the following types of businesses experiencing revenue disruption as a result of COVID-19:
Small businesses with fewer than 500 employees.
Select types of businesseswith fewer than 1,500 employees.
501(c)(3) non-profits with fewer than 500 workers.
Some 501(c)(19) veteran organizations.
Self-employed workers, sole proprietors, and freelance or gig economy workers.
Businesses, even without a personal guarantee or collateral, can apply one of these loans as long as they were operational on February 15, 2020, and had paid employees at that time (even if the owner is the only employee). On a final note, the SBA’s 500-employee threshold includes all types of employees: full-time, part-time, and any other status.
What are the terms of these loans?
Loans under the Paycheck Protection Act can be 2.5 times the borrower’s average monthly payroll costs, and they cannot exceed $10 million. The interest rate for Paycheck Protection loans are set at 0.5%, and loans mature after two years. No personal guarantee or collateral is required. The lenders are expected to defer fees, principal and interest for no less than six months and no more than one year. The SBA notes that all loans will have the same terms regardless of lender or borrower. Loan payments will be deferred for six months
Lenders will also ask you for a good faith certification that:
The loan is needed to support ongoing operations;
The loan will be used to retain workers, maintain payroll, and pay for mortgage, lease, and utility payments;
The borrower does not have a pending application for a similar loan; and
The borrower did not get a similar loan between Feb. 15, 2020 and Dec. 31, 2020.
How can I get my loan forgiven?
Small businesses that take out these loans can get some or all of their loans forgiven. Generally speaking, if employers continue paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven. Businesses that rehire workers that were laid off prior to the loan origination will not be penalized. If businesses can restore normal payroll in the eight-week period, they should be able to get the loan forgiven, effectively making the loan a grant.
When can I apply for a Payroll Protection Loan?
The Paycheck Protection Program application process will roll out in two phases, one week apart.
On April 3, 2020, small businesses and sole proprietorships can begin applying for these loans.
On April 10, 2020, independent contractors and self-employed individuals can begin applying. The SBA advises that all businesses should “apply as quickly as you can because there is a funding cap.”
How do I apply?
First, fill out the SBA’s Paycheck Protection Program sample application. Businesses can submit their application to any existing SBA-approved private lender or through federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions that are participating.
The SBA and local banks around the country are still finalizing the program, so check with your local bank or credit union to see if they are taking part in the program. Banks that are already SBA-approved lenders may be quicker to put the loan program in place. Businesses may want to start by talking to any lender they currently work with first to see if they are taking part in the program as well.