Small Business Covid-19 Stimulus Answers Updated Daily

SBA Small Business Disaster Relief loan verse the Cares Act  

There are some big differences between the Disaster Relief Loan and the proposed Cares Act. If you have anyone applying for the disaster relief loan, please advise them to wait until we all have full clarity on the Cares Act as well. This is a fluid situation as the stimulus package works through the final signature from the president. The Cares Act may be the better alternative and you may not be eligible for it if you take the disaster relief loan option.   

Here are some of the proposed differences:  

SBA’s disaster loan program: This is a loan of up to $2MM at 3.75% interest for up to 30 years. This is up and running now but is not administered or issued through the banks. To apply, borrowers will need to apply on the SBA website with administration through their respective governor’s offices so long as their state is under a state of emergency and the underwriting is being done directly at the SBA offices.  
The Cares Act.    

•        Overall: The law will expand the Small Business Act to provide up to $300 billion (likely to increase from negotiations) in loan guarantees in favor of SBA Lenders making SBA Loans to any business concern, private or public nonprofit that employs not more than 500 employees.

•        Amount: The maximum loan amount for an applicant is the lesser of (i) $10 million dollars or ((ii) the average total monthly payments for payroll, mortgage, rent, and other debt payments of the applicant incurred during the 1 year period before the date on which the loan is made multiplied by 4)

•        Use of Proceeds: During the period from March 1, 2020, to December 31, 2020, the loan proceeds may be used to pay payroll (including sick leave), salaries, mortgage payments, rent, utilities, and other debt obligations (so long as such other debt obligations were incurred prior to March 1, 2020)

•        Evaluation: The creditworthiness evaluation and underwriting process are essentially eliminated other than determining whether the business was in operation on March 1, 2020, and had employees for which the borrower paid salaries and payroll taxes.

•        Deferral of Payments: The complete deferral of loan payments would be permitted for up to one year, and the SBA will provide guidance on the deferment process within 30 days.

•        Guaranty: The SBA will guarantee 100% of the balance of the loan outstanding at the time of disbursement through December 31, 2020, and thereafter, 75% of the balance of the loan outstanding at the time of disbursement if it exceeds $150,000 and 85% if it’s less than that. 

•        Loan Forgiveness:  Borrowers will be eligible for forgiveness of the loans up to the sum of the total payroll costs plus payments on debt obligations (if such debt obligations were incurred prior to March 1, 2020) expended during the period from March 1, 2020, to June 30, 2020. This forgiveness amount is reduced proportionally by the percentage of full-time employees laid off by the borrower compared to the borrower’s 2019 employment levels from March - June 2019.  The amount is forgiven also excludes wages of an employee in excess of $33,333 during the four-month period. The amount forgiven is not considered taxable income. 

•        SBA Lenders: The Treasury Secretary is being authorized to establish a process by which lending institutions that aren’t currently authorized as SBA Lenders will be able to provide these types of loans for the duration of the emergency.  
We should also consider that incurrence of the above loans/guarantees is likely currently prohibited under any existing loan agreement between a borrower and lenders so due thought should be given to considering how to address the incurrence of these loans without causing defaults under existing agreements.


This information is credited to Mike Ramsay
Senior Business Development Officer
Bank United

More than half of 1,500 respondents in a recent Goldman Sachs survey expect their small business to survive three months or less under current circumstances, yet more than 67% don’t know how to access emergency funding.

Businesses across the country have been hit and they have been hit hard. With the passage of the Federal Stimulus Package comes hope and confusion. The stimulus bill will provide much needed assitance and a boost to small business.

As it stands, the stimulus package includes $350 billion in small business loans. But these loans don’t need to be paid back. The money would have to be used for expenses like payroll, insurance, rent and utilities – but the loan would then be forgiven.

The Senate’s plan currently supports American small businesses in the following ways, according to policy experts:

• A $350 billion forgivable loan program designed to ensure that small businesses do not lay off employees.

• A 50% refundable payroll tax credit on worker wages will further incentivize businesses, including ones with fewer than 500 employees, to retain workers.

• Looser net operating loss-reduction rules that will allow businesses to offset more.

• A delay in employer-side payroll taxes for Social Security until 2021 and 2022.

• Sole proprietors and other self-employed workers could be eligible for the expanded unemployment-insurance benefits the bill provides.

• A portion of the $425 billion in funds appropriated for the Federal Reserve’s credit facilities will target small businesses.

At a whopping 57 million, self-employed people make up a huge piece of the country’s economic puzzle. But during a global pandemic, when business starts drying up, those who work for themselves are among the most vulnerable.

Finally, the CARES Act includes $349 million for the U.S. Small Business Administration (SBA) to guarantee loans through its 7(a) loan program. 

The SBA is also offering Economic Injury Disaster Loans for qualifying small businesses. These are low-interest loans with terms potentially as long as 30 years for small businesses and nonprofits. 

You can apply for an SBA loan through it's site. Be prepared to provide the following information:

• Tax Information Authorization (IRS Form 4506T), completed and signed by each principal or owner
• Recent federal income tax returns
• Personal Financial Statement (SBA Form 413)
• Schedule of Liabilities listing all fixed debts (SBA Form 2202)
• You may also need to provide profit and loss statements, recent tax returns, and balance sheets. 

Are you still feeling overwhelmed or confused? Join us next week for our FREE Webinar with expert guest, Steve Mariani from Raleigh, NC. Steve will assist business owner with the most up to date information and help clarify some of the more confusing elements of the stimulus package.

Register below!

There are roughly 31 million small businesses that employ 59 million workers across the nation, according to the Small Business Administration’s Office.

The Coronavirus Aid, Relief and Economic Security Act, includes a $350 billion loan program for businesses with fewer than 500 employees (including sole proprietors, independent contractors and anyone otherwise self-employed). 

Under the bill, loans can be used to meet payroll and cover certain other expenses like utilities or insurance premiums. And, borrowers will be able to apply for loan forgiveness.

The new loans will be available through private financial institutions — i.e., banks, credit unions — that participate in the Small Business Administration’s lending network.

Under the CARES Act, the loans can be for as much as 2.5 times payroll or $10 million, whichever is less. Payments can be deferred by up to a year, and businesses will be able to apply for forgiveness of the loan (or a portion of it), based on the amount used during the eight weeks following loan approval. Any amount not forgiven would have a maximum interest rate of 4%.

The bill also waives typical SBA loan requirements that credit must be unavailable elsewhere and that the borrower must personally guarantee the amount or provide collateral.

Additionally, small businesses applying for a loan will be eligible for up to a $10,000 emergency grant — which would be subtracted from the forgiven loan amount — that would be issued within three days of the application being received.

If you are a small-business owner hoping to qualify for one of these loans, start by reaching out to your bank or lending institution.

Register for our FREE Webinar for more details and clarity.