There are a number of Federal programs adopted to help businesses affected by COVID-19. Guidelines and forms have been in a state of flux, so it is important to make sure you are accessing the latest version. Businesses should act quickly to apply, because it will take time for the government to process, and available funds will eventually run out.

Three programs are:

            Economic Injury Disaster Emergency Grant (“EIDEG”)

            Economic Injury Disaster Loans (“EIDL”)

Paycheck Protection Program (“PPP”)

The EIDEG is under EIDL program.

EIDEG – Borrowers can receive a $10,000 emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue losses. The grant is available for businesses with fewer than 500 employees; as well as available for sole proprietors, independent contractors, or self-employed individuals.

The application is on-line and easy to complete and submit. If you have not done so already, and have been affected, you should apply as soon as possible. The link is: https://covid19relief.sba.gov/#/

EIDL – The recent CARES act expanded eligibility for small businesses for the SBA’s EIDL program. Loans are available for businesses with fewer than 500 employees. Loans for amounts under $200,000 can be approved without a personal guarantee. Loans can be approved by the SBA based solely on an applicant’s credit score.

The maximum loan amount is $2,000,000. The interest rate is 3.75% for businesses, 2.75% for nonprofits. The repayment term is determined on a case by case basis, and has a maximum of 30 years. Payments are deferred for one year.

The funds may only be used for fixed debts, payroll, accounts payable and other bills that cannot be paid because of the disaster’s impact.

The application is the same as the emergency grant under the EIDEG: https://covid19relief.sba.gov/#/

PPP – The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees. The loan amounts will be forgiven so long as:

  • The proceeds are used to cover payroll costs (which includes wages, benefits, commissions, state and local taxes on compensation), and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
  • Employee and compensation levels are maintained.

Payroll costs are capped at $100,000 on an annualized basis for each employee. The government predicts that not more than 25% of theforgiven amount may be for non-payroll costs.

The amount of loan forgiveness will be reduced if you decrease your full-time employee headcount or you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. You, however, have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and
April 26, 2020

This program is available for businesses with 500 or fewer employees. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries (access them via this link https://www.sba.gov/federal-contracting/contracting-guide/size-standards).

Any loan payment will be deferred for 6 months. You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and farm credit system institution. Applications for small businesses and sole proprietorships can be submitted starting April 3, 2020; and application for independent contractors and self-employed individual can be submitted starting April 10, 2020.

Loaned amount can be up to 2.5 times your average monthly payroll costs for the preceding 12 months, with a maximum load amount of $10,000,000. Seasonal and new business use a different time period.

Interest is a 1% fixed rate. (An example of how things are changing daily, just today the Federal government changed the rate from 0.5% to the current 1%.) Payments under a loan are deferred for 6 months, but interest will continue to accrue over that period. Loans are due in 2 year. There are no prepayment penalties or fee. No collateral is required. No personal guarantee
is required.

The link to the application is: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

Payroll documentation is required. The program is available through June 30, 2020, so act fast.