SBA Loan Programs Under the CARES Act

SBA Loan Programs under the CARES Act: Look Here First For Financing

SBA Small Business Loan Programs Expansion

of SBA Section 7(a) Loan Program

Paycheck

Protection Program (PPP) Loans from SBA Lenders (banks) Economic Loans

Injury Disaster Loan Program (EIDL)

directly from the U.S. government

Paycheck Protection Program (PPP) 

$349 Billion authorized  Forgivable loans to incentivize small businesses to avoid furloughing their employees.  Expands “small business” eligibility Any

business with 500 or fewer employees, regardless of revenue. Hotels and restaurants (NAICS Code 72) with 500 or fewer employees per location. Note: SBA affiliation rules still apply, except for hotels, restaurants, franchises and SBIC-financed companies.

PPP Loan Terms Up

to 2.5X average monthly payroll over prior 12 months, with a limit of $10 million Term of loan is 2 years Interest rate will be 0.5% Payments deferred for six months No security or personal guarantee required Permitted uses: payroll, rent, employee benefits, utilities and interest on pre-existing debt

PPP Loan Forgiveness The

loan amounts eligible to be forgiven are the sum of the following expenses during the 8 weeks after origination of the loan: Payroll

costs Interest on a covered mortgage obligation (but not other debt) Covered rent payments Covered utility payments “Covered”

2020.

means it was in force before February 15,

PPP Loan Forgiveness (continued) The

eligible amount of loan forgiveness is reduced as follows: Proportionately

in connection with a reduction in employees (i.e., 20% less employees equals a 20% reduction in amount forgiven) Less the amount of a compensation decrease during the 8 weeks following loan origination of more than 25% for any employee making less than $100,000 The

amount of the loan that is forgiven does not count as gross income to the employer.

EIDL Loan Program $17

Billion authorized This program is currently live – apply online at https://www.sba.gov/disaster/apply-for-disasterloan/index.html Eligibility Small

businesses (500 or fewer employees) Private non-profits SBA allowed to approve based on applicant’s credit score

EIDL Loan Terms Loans

are determined by actual economic injury and can be for up to $2 million Term of up to 30 years Interest rate is 3.75% for small businesses and 2.75 for non-profits Permitted uses: repay fixed debts, payroll, accounts payable and other bills that cannot be paid due to disaster Loans over $25,000 are required to be secured with collateral 

EIDL Loan Terms (cont.) No

personal guarantee for loans below $200,000 Not required to seek credit elsewhere You can get a $10,000 advance on this loan within 3 days. If your EIDL loan application is denied, you do not have to repay the $10,000 advance.

Practical Tips: PPP vs. EIDL  EIDL

is currently live, and you can get an advance of $10,000 in 3 days. Likely 3-4 weeks SBA for decision and funding.  PPP is not yet live. Regulations to come out within 15 days after CARES Act (i.e., by April 11)  PPP has major advantage of being forgivable. Also larger appropriation ($349B).  You

can obtain an EIDL loan and then refinance it into a forgivable PPL loan (to the extent of permitted uses under PPP).  However, you cannot obtain both loans for the same purposes.  Important dates: PPL runs through June 30, 2020; EIDL runs through Dec. 31, 2020  Check your existing loan covenants.

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