COVID-19 has affected all aspects of our lives, especially those of us who own and operate small businesses. Fortunately, the CARES Act provides programs aimed at helping small businesses weather the storm. Details of these programs are subject to change as agencies attempt to hastily implement these programs. The following are two of the programs available:
Likely the first question you have as a small business owner is, “how are we going to make it through this?” A large part of that answer may come from the PPP loan program offered by the Small Business Administration and administered by private lenders. This program allocates $349 billion to small businesses who are affected by COVID-19, and unlike most loans you may never have to pay it back. SBA loans in our area are being disbursed within days of an accepted application. Here are some of the highlights:
- Loans up to 2.5 times a small business’ monthly payroll cost. So, payroll costs of $50,000 per month qualifies for a $150,000 loan. The way you calculate your monthly payroll costs can make a BIG difference in the loan amount.
- Forgiveness of amounts spent on payroll, mortgage interest, rent and utilities. You do not have to pay these amounts back.
- No payments for 6 months and 1% interest on balances that are not forgiven.
- Applications for processed by private lenders.
- More information and answers to many questions from the US Treasury Department.
Unlike the PPP loan, the loan amount is not tied to your business’ payroll and will not be forgiven. However, you may qualify for a working capital loan up to $2 million at an interest rate of 3.75%. The SBA has streamlined its application process and is advertising loan grants of $10,000.
- Loan payments are deferred for up to 1 year.
- Loans up to $200,000 may be approved without a personal guarantee.
- No collateral required for loans of $25,000 or less. This is a boon for service business that may not own significant inventory, equipment, or real estate.
- Approvals can be based on credit score, alone, without a first-year tax return.
- Eligible business may receive a $10,000 emergency grant within 3 days of an accepted application. The grant would be subtracted from your PPP Loan eligibility.
At A. R. Pike Law Firm, we are here if you need us during these uncertain times.