Hi There!
Here are details we have all been looking for. There are two types of SBA loans available:
1)
Emergency loans or EIDL
, which are available now and subject to repayment thru SBA or your bank.
2)
PPP loans
(Paycheck Protection Plan loans), which should be available from your bank this week or next week and are subject to repayment. However, these are the loans that may turn into a full or partial grant. These are the loans that have been in the news recently and are the most desirable option.
Please be aware of which type of loan you are applying for.
You cannot have both
.
- Small business is defined as 500 or fewer employees
- Loan amount: 2.5x the average monthly payroll in 2020
- Will be funded through local lenders only
- Independent contractors and sole proprietors may apply
- Payroll is capped at $100k per employee
- No personal guarantee on loan
- No collateral requirement
- Borrowers certification: (1) You will eventually need to prove the loan is needed because of the current economic climate, e.g., business closed, lost employees, business is drastically reduced, etc. (2) Funds will be used for “covered expenses”, e.g., payroll, rent, utilities. (3) No other similar loan applications.
- Loan terms: Maximum of 10 years. Interest rate not to exceed 4%. At least six months deferral of payments.
After you get the loan:
- Employers may seek forgiveness of the portion of the loan that relates to payroll, rent, mortgage payments or utilities. (Converting the loan or part of the loan into a grant.) If all employees are kept on payroll for eight weeks, SBA will forgive the portion of the loans used for payroll, rent, mortgage interest, or utilities. Up to 100 percent of the loan is forgivable.
- You can seek loan forgiveness by filing an application eight weeks after the funding of the loan.
- Forgiveness will be reduced if employees are terminated or put on unemployment or you reduce salaries. If they are already on unemployment you need to rehire them.
- There are formulas that need to be calculated to determine what can be forgiven.
- There is a checklist of items needed to apply. Please see your bank’s application.
SKP can help with the financial portion of your initial application, but you need to complete as much as you can first. We will help prepare the forgiveness application when it becomes available in a couple of months.
Again, there are a lot of details still to come, but this is the meat of it. The idea is to keep you paying your own employees and keep them off unemployment. If you commit to that, you will get some/all loan forgiveness.
BE CAREFUL OF SCAMS:
Beware of ads/emails requesting your private information to help you get the loans. The applications should only come from your bank and the banks do not have them available yet.
Thank you and stay safe!
Rich Pavano, CPA
