CARES Act Allocates Billions to Help Small Businesses
For our business clients, we wanted to keep you informed of the loans and grants made available to small business owners. Small businesses like yours are essential for the growth of our communities and economy. We understand the significance of keeping communities aware and invite you to share this information with small businesses that have also been impacted by this health crisis.
As you may have heard, in response to the Coronavirus (COVID-19), the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 (https://www.congress.gov/116/bills/hr748/BILLS-116hr748enr.pdf) aims at assisting small business owners affected financially by this outbreak. According to Steven Mnuchin, businesses can go to participating SBA 7(a) lenders, major banks or credit unions, apply for a loan, and be approved on the same day.
The initiatives of the CARES Act are numerous and your ability to obtain the necessary information and apply for these loans or grants is critical. We have provided an overview and resources below to help those of you in financial need. Time is crucial since there is approximately $350 billion allocated to this relief.
What Assistance is Available?
- Economic Injury Disaster Loans and Loan Advances https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance
- SBA Debt Relief https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/sba-debt-relief
- SBA Express Bridge Loans https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/sba-express-bridge-loans
- Paycheck Protection Program https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp
Economic Injury Disaster Loans and Loan Advance (EIDL). Small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.
In addition, this program provides small business owners with working capital loans of up to $2 million to help overcome the temporary loss of revenue. The loan advance is intended to give short-term economic relief. Funds will be made available within three days of a successful application.
SBA Debt Relief. The initiative will provide a reprieve to small businesses as they overcome the challenges created by this health crisis. Under this program:
- The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
- The SBA will pay the principal and interest of existing 7(a) loans for a period of six months.
SBA Express Bridge Loans Pilot Program. If your small business has an urgent need for cash while waiting for decision and disbursement on EIDL loan, you may qualify for an SBA Express Disaster Bridge Loan. These loans can be used to bridge the gap while applying for a direct EIDL loan. Terms:
- Up to $25,000
- Money available within a week
- Will be repaid in full or in part by proceeds from the EIDL loan.
Paycheck Protection Program. This program provides cash flow assistance through federally guaranteed loans to eligible small businesses who maintained their payroll during this outbreak. It also assists these employers harmed by COVID-19 between February 15th, and June 30th, 2020. A major incentive of PPP is to help bring workers who may have already been laid-off back onto payroll. Under this program:
- Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
- The max loan is equal to 250 percent of your average monthly payroll costs.
- Loan payments will be deferred for six months.
- If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
- Employee/owner compensation of over $100,000 are not eligible for payroll.
- Compensation of employees whose principal place of residence is outside of the US are also not eligible.
- Payroll taxes, railroad retirement taxes and income taxes are not eligible.
- Qualified sick leave ages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act are not eligible.
- Qualified sick leave ages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act are not eligible.
- The Paycheck Protection Program will be available through June 30, 2020.
Who Can Apply?
- This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons).
- Private non-profit organization or 501(c)(19) veterans’ organizations, and faith based organizations https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith-Based%20FAQ%20Final.pdf affected by coronavirus/COVID-19.
- Businesses in certain industries may have more than 500 employees if they meet standard for those industries. Check the following website to determine the eligibility of your company and its size https://www.sba.gov/document/support--table-size-standards.
- Small businesses in the hospitality and food industry (NAICS 72) with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.
- For more information about size standards, contact the size standards specialist at your nearest SBA Government Contracting Area Office.
- You also can contact the Office of Size Standards by email at firstname.lastname@example.org by phone at 202-205-6618.
Loan Details and Forgiveness
- Lenders may begin processing loan applications as soon as April 3, 2020.
- The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, health care costs, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll).
- Loan payments will also be deferred for six months.
- No collateral or personal guarantees are required.
- Neither the government nor lenders will charge small businesses any fees.
- Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.
- Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
- This loan has a maturity of 2 years and an interest rate of 4%.
- If you wish to begin preparing your application, you can see the information that will be requested from you. https://www.sba.gov/document/sba-form--paycheck-protection-program-ppp-sample-application-form
Lender Forms and Guidance
- The Interim Final Rule announcing the Paycheck Protection Program information is being posted in advance of publication in the Federal Register. https://www.sba.gov/document/policy-guidance--ppp-interim-final-rule
- Lenders who need assistance accessing SBA's E-Tran system to process loan guarantee requests may call our Lender Customer Service Line at 1-833-572-0502.
Top 10 SBA Lenders for the 7(a) Program
The SBA 7(a) loan program is the most popular of the SBA loan programs. As a result, this program has the largest number of participating lenders. Large banks are very active 7(a) SBA lenders. Since you already have an established banking relationship this is a good start. Keep in mind, lenders will first service their existing client base and then address their new relationships.
Below, are the top SBA lenders. It’s important to note that all of these lenders are part of the SBA’s Preferred Lender Program. This means the SBA has authorized these lenders to approve applications for SBA funding without submitting the application to the SBA first. Working with a Preferred Lender Program will save you valuable time, if you already have an existing business banking account with them, when searching for a business loan.
Here are the top 10 SBA lenders for 7(a) loans:
- Live Oak Banking Company
- Newtek Small Business Finance
- Wells Fargo
- Byline Bank
- Huntington National Bank
- Celtic Bank Corporation
- JPMorgan Chase
- S. Bank
- Readycap Lending
Enhanced Debt Relief. SBA provides local assistance via 68 district offices and a nationwide network of resource partners. To find resources near you click on this link. https://www.sba.gov/local-assistance
Extraordinary times requires extraordinary actions. We encourage you to first contact your banking relationship to seek assistance for you and your business. As always, your EBW team is her to support you. Should you have any questions or would like to discuss this information, please do not hesitate to contact your advisor.
The content in this article was prepared by the article's authors. Voya Financial Advisors, Inc. makes no claims, promises, or guarantees about the accuracy or completeness of the contents.
Investment adviser representative and registered representative of, and securities and investment advisory services offered through Voya Financial Advisors, Inc. (member SIPC).
EBW is not a subsidiary of nor controlled by Voya Financial Advisors.