Article originally published March 25, 2020
Last updated April 4, 2020
The Small Business Administration (SBA) sample application can be found by clicking here. Please note that each bank is using the document to develop its own information gathering system or application.
As a result of the Coronavirus Aid, Relief and Economic Stimulus (CARES) Act legislation passed on Friday, March 28, 2020, there are two loan programs available to businesses who have been damaged by the pandemic:
- The Economic Injury Disaster Loans (“EIDL”) which were funded earlier this month, and
- The Paycheck Protection Loans, which are part of the CARES Act.
GBQ’s COVID-19 response team has dedicated resources to assist business owners in filing for the SBA relief loans designed to assist small businesses suffering economic harm from the COVID-19 pandemic.
How can we help?
We know these are challenging times and that caring for your customers and employees is your top priority. GBQ can assist clients by completing the initial application for a flat fee in order to free up your time to focus on your business. Getting your application in as soon as possible is imperative as processing times are projected to increase as more businesses apply. We can help you get your application in quickly, accurately and with the appropriate information. As the application process progresses, we can also assist you in the later phases of information gathering and responding to any requests.
Further, if you do decide that the Paycheck Protection Loan is the right answer for you, you will want to ensure that you are maximizing the opportunity for debt forgiveness by analyzing FTEs, rate of pay, and other variables. Businesses should also implement policies and procedures to ensure the business is spending the monies in accordance with the loan requirements and that procedures are in place to capture the appropriate information and support in order to maximize any debt forgiveness.
What is the process to obtain a loan?
- Economic Injury Disaster Loans (“EIDL”): These will continue to be originated with the SBA. Businesses use the online SBA portal for application.
- Paycheck Protection Loans: Coronavirus Aid, Relief and Economic Stimulus (CARES) Act provides for other banking institutions, other than the SBA, the ability to originate these loans. That means your regular lender, if it is SBA approved, can originate these loans.
Do I qualify?
As we mentioned above, there appear to be two paths for obtaining financing. In the table below, we have compared and contrasted those loans. The premise of the Paycheck Protection Act and its related debt forgiveness is to incentivize businesses to retain and pay as much of its workforce as possible. You will see that much of the focus of the lending and debt forgiveness is centered around payroll and workforce calculations.
| Program Detail | SBA Economic Injury Disaster Loans | Proposed Paycheck Protection Loan per the Pending CARES Act |
|---|---|---|
| . | ||
| . | ||
| Loan Program Amount | $50 billion. | $349 billion. |
| . | ||
| . | ||
| Loan Amount | Up to $2.0 million. It can be used for payroll expenses, paid sick leave, accounts payable and debt service. The SBA will use a formula to determine the amount. | Up to $10 million maximum based on a multiple of 2.5 times monthly payroll, debt service and other expenses. |
| . | ||
| . | ||
| Interest Rate | 3.75% for business and 2.75% for nonprofits. | 1%. |
| . | ||
| . | ||
| Terms | Up to 30-year terms. | Two-year term. |
| . | ||
| . | ||
| Business Size | Revenue and employee qualifications based on NAICS code. |
Revenue restriction is lifted but the company must be under 500 employees. Affiliated businesses must analyze rules. |
| . | ||
| . | ||
| Debt Forgiveness | No provision for debt forgiveness. | Provides for debt forgiveness based on a formula with inputs related to payroll costs, FTEs and any reduction in employee pay during the time period the pandemic is expected to last. |
| . | ||
| . | ||
| Deferral of Payments | 30 days. | Minimum of 6 months, up to 1 year. |
| . | ||
| . | ||
| Personal Guarantee | Required by owners of 20% or more of the company, or at least one guarantor. | No personal guarantee or collateral required. |
| . | ||
| . | ||
| Prepayment Penalties | Waived | Waived |
| . | ||
| . | ||
| Restaurant & Hospitality | N/A | NAICS Code 72 – Test for small business will be no more than 500 employees per location. |
| . |
For more information, please contact your GBQ advisor or click here and a GBQ advisor will be in contact within 24 hours.
