By Rachel Puryear, Attorney at Law
If you have a small business, there’s a good chance you’ve been having a very tough time lately. With necessary lockdowns in place for unknown periods of time, you may be wondering if your business will see the end of shelter-in-place.
However, the good news is, there are a couple of lifelines available to help keep your business afloat. I will go over them in this post.
The recent CARES Act/Stimulus bill made two low-cost loans available to small businesses, as a means of helping them survive the hardships in complying with shelter-in-place orders: The Paycheck Protection Program (PPP), and the Economic Injury Disaster Loan (EIDL).
The Paycheck Protection Program (PPP):
This loan is designed to keep employees on the payroll, or to rehire them quickly. This loan is available through participating lenders, and is available now. The maximum loan amount is up to $10 million, and has an interest rate of 1% (subject to change). The term is for two years, and payments are deferred for six months. These loans are 100% guaranteed by the Small Business Association (SBA). No collateral, and no personal guarantee is required. No borrower or lender fees are payable to the SBA. All small businesses are eligible; including nonprofits, Veterans’ organizations, sole proprietorships, self-employed individuals, independent contractors, and Tribal concerns.
This loan is provided to pay for up to eight weeks of payroll costs, including benefits. Payroll costs include salaries/wages/commissions/tips (up to $100,000.00 annualized per employee), benefits such as paid leave and health care, and state and local taxes assessed on compensation. The loan will be forgiven if it is used for payroll expenses. The loan funds may also pay interest on mortgages, rent, and utilities – but in order for the loan to be forgiven, no more than 25% of the funds must have been used for mortgage interest, rent, and utilities.
The loan may be used to pay costs retroactive to February 15, 2020. Employers can rehire employees through June 30, 2020. To find participating PPP lenders, visit here.
The Economic Injury Disaster Loan (EIDL):
This loan is meant to pay for financial obligations and operating expenses which could have been paid if the disaster had not occurred. The types of costs that these loan funds can be used for includes fixed expenses, rent, payroll, accounts payable, extraordinary expenses incurred due to disaster (such as having to disinfect an area). Funds from this loan may not be used towards refinancing long-term debt. This loan is provided directly by the SBA. This is not a 7(a) loan.
The maximum size for this loan is $2 million. The interest rate is 3.75% (subject to change). Repayment can be deferred.
Note that certain types of businesses do not qualify for an EIDL – such as businesses based around gambling, selling products or services of a prurient (sexual) nature, farms, religious activities, lobbying, illegal activities, or where the owner is delinquent on child support obligations.
Apply here. Once you apply, the SBA will process your application, and advance $10,000.00 within a few days. Then, even if your loan is not approved, you can still keep the $10,000.00 as a grant! So do take advantage of this great benefit.
As always, dear readers, be safe and healthy out there. Please help keep everyone safe by observing official recommendations for social distancing, sheltering in place, covering your face in public, and practicing proper hygiene. Please also help others where you can in ways big and small, and ask for help if you need it. We will all get through this together. Thank you for reading, and for following me. I hope you enjoyed this, and learned something valuable.
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Please note that the above is offered for educational purposes only. The information presented may not take into account every exception, variation, or complication which could apply to someone’s legal matters. Accordingly, nothing in this post or blog is ever intended as, nor should be construed by or relied upon by anyone, as legal advice. If you need legal advice, please consult an attorney who can give you assistance specific to your needs.