YOU ARE ELIGIBLE FOR A PAYROLL PROTECTION LOAN

Eric Hileman

April 2, 2020
YOU ARE ELIGIBLE FOR A PAYROLL PROTECTION LOAN

If, you work in the Gig Economy, you are a 1099 worker, a 1 person business, independent contractor, work for hire, self-employed, along with any business with less than 500 employees.

Under the CARES Act, qualifying SBA loans MAY BE FORGIVEN in certain circumstances, such as where the borrowed funds are used to cover payroll, mortgage interest payments, rent, or utility payments.

Note: Information is changing daily and we will continue to update this post as new information is released.

We hope that you and your loved ones are all safe and well. 

In addition to the unprecedented challenges that the novel coronavirus (COVID-19) pandemic has placed on all of our personal lives, many businesses are struggling to stay afloat as efforts to contain the virus disrupt operations and reduce or eliminate revenue streams.   

The resources available to small businesses are evolving, and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), signed by the President, promises to provide significant and much-needed relief to the business community. 

Currently, there are two types of loans Economic Injury Disaster Loan (EIDL) and Payroll Protection Program (PPP).

U.S. Small Business Administration (SBA) Payroll Protection Loan (PPP)

The new loan program will help small businesses with their payroll and other business operating expenses. It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees – all with a 100% guarantee from SBA. All loan payments will be deferred for six months. Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest.

PPP for SMB’s is open now starting April 3, 2020.  To apply see Can I Apply Now or contact your current bank to find if they are participating.

PPP for Sole Proprietors is scheduled to open on April 10, 2020.

U.S. Small Business Administration (SBA) Economic Injury Disaster Loan (EIDL) Program

Small businesses are also currently eligible to apply for a low-interest disaster loan of up to $2 million through the SBA.  These loans may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid due to the disaster’s impact.  The current interest rate is up to 4% for small businesses and 2.75% for not-for-profit entities.  See the infographic pages below to calculate how much you’re eligible to borrow.  To apply for the EIDL or obtain more information here.  

Under the CARES Act, qualifying SBA loans MAY BE FORGIVEN in certain circumstances, such as where the borrowed funds are used to cover payroll, mortgage interest payments, rent, or utility payments.

EIDL Vs. PPP

 

Economic Injury Disaster Loan (EIDL)

Paycheck Protection Program (PPP Section 7(a))

AdministratorSBASBA Approved Financial Institutions
Amount of LoanUp to $2 million
  • Lesser of $10 million or 2.5 times average monthly payroll costs incurred during the 12-month period prior to the loan date.
  • Calculations for a seasonal and new business can vary
Interest RateFor-Profit up to 4%

 

Non-Profit 2.75%

1%
Term/ MaturityUp to 30 years2 years
Deferral12 months
(interest accrues during deferment)
6 months
(interest accrues during deferment)
PrepaymentPrepayment is eligiblePrepayment is eligible
Eligibility*
  • Small businesses in all U.S. states and territories, including sole proprietors or independent contractors
  • Private nonprofit organizations
  • Small agricultural cooperatives
  • Tribal small business concerns
  • ESOPs
  • Fewer than 500 employees*
  • Small businesses in all U.S. states and territories, including sole proprietors, independent contractors, and eligible self-employed individuals
  • 501 (c)(3) nonprofit organizations
  • 501 (c)(19) veterans organizations
  • Tribal small business concerns
  • Fewer than 500 employees in most instances, more in certain industries*
UsageFixed Debts, payroll, and related benefits**, accounts payable and other expenses that cannot be paid because of the disaster’s impactPayroll and related benefits** Interest on mortgage payments or other debts, rents and utilities
Cannot be used forRefinancing of debt, payment of other SBA loans or lenders, tax penalties, civil fines, repairs of property or other physical damage, pay dividends or distributions to owners or partnersLimited to uses noted above

 

(EIDL may be eligible to be refinanced into a PPP loan)

CollateralIf available, collateral will be taken on loans greater than $25,000No collateral from business or its owners
Loan forgiveness and grant eligibilityEmergency grant up to $10,000

 

(EIDL may be eligible to be refinanced into a PPP loan)

  • Eligibility is based on specific requirements
  • Forgiveness*** available on a portion of the loan proceeds if employers retain employees during the specified period
GuaranteesWaives requirement of personal guarantees on loans less than $200kNone
Can I Apply Now?Application process and loans are available nowPPP for SMB’s is open now but not all banks are ready. Contact your bank to find out when they will be ready or use this list of banks accepting applications for SMB’s now:

 

PPP for Sole Proprietors is scheduled to open on April 10, 2020.

*Alternate revenue size standards do not apply to the EIDL or the PPP, but alternate (increased) employee-based size standards do apply to the PPP for some industries. Affiliated entities are included in the evaluation for most industries, except franchises and NAICS code 72, Accommodation and Food Services, and SBIC funded businesses for the PPP.
**Excludes salaries in excess of $100k or qualified sick and family leaves covered under sections 7001 and 7003 of the Families First Coronavirus Response Act.
***Forgiveness amount determined considering factors such as full-time equivalents and payroll rate reductions compared to a defined pre-COVID-19 impacted benchmark period. Forgiveness is non-taxable.

Up to a $10,000 Advance on an Economic Injury Disaster Loan (EIDL)

The CARES Act, which provided additional assistance for small business owners and non-profits, including the opportunity to get up to a $10,000 Advance on an Economic Injury Disaster Loan (EIDL). This Advance may be available even if your EIDL application was declined or is still pending, and will be forgiven.

If you wish to apply for the Advance on your EIDL, please visit covid19relief.sba.gov as soon as possible to fill out a new, streamlined application. In order to qualify for the Advance, you need to submit this new application even if you previously submitted an EIDL application. Applying for the Advance will not impact the status or slow your existing application.

SBA Express Bridge Loans

The Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with minimal paperwork and a speedy turn-around. These loans can be used to bridge the gap while applying for an EIDL and will be repaid in full or in part by proceeds from the EIDL.  More information is available here.

Federal Income Tax Filing and Payment Deadline Extension

The federal tax return filing deadline is now July 15, 2020. For tax payments of up to $10 million, the IRS has also extended the deadline for both individuals and businesses to July 15, 2020. Estimated tax payments for 2020 originally due on April 15 will now be due on July 15.   

Coronavirus Emergency Loans Small Business Guide and Checklist

Source: US Chamber of Commerce
corona_virus_smallbiz_loan_final.pdf

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