I wanted to reach out again since there are new relief programs available to small businesses. The “CARES Act” was signed into law last week and has significant provisions for small business that everyone should consider.
SBA 7(a) Loan Program Expansion – “Paycheck Protection Program”
These loans are through a bank, not the SBA directly, therefore these loans are different than the ones several of you applied for last week.
The Good Stuff:
- Small Businesses can borrow up to 250% of their average monthly payroll costs.
- These loans are non-recourse – no personal guarantees required.
- The loans are for two (2) years at .5% interest.
- No pre-payment penalty (which is different than most SBA loans).
The REALLY Good Stuff:
- These loans are FORGIVABLE. If used correctly, you won’t have to pay them back (subject to limitations below)
- Loan proceeds used for payroll, rent, or utilities during the eight (8) weeks after the date of the loan are eligible to be forgiven. There are some limitations: (1) If used for rent, the lease must have been in place prior to January 1, 2020; (2) Employee compensation above $100,000 per employee is not eligible for forgiveness.
- Loan balances that are forgiven are not treated as taxable income; No income tax will be due on amounts forgiven
What we’re doing to help:
- I’ve reached out to several local bankers to try to get priority processing for my clients. I should know if this is possible in the coming days.
- We’re putting together a service to evaluate your options and walk people through this process. There are multiple steps involved in this loan program, including documentation and applications for initial approval, plus additional paperwork when applying for loan forgiveness. I believe we’ll be able to handle that for you.
- From conversations we’ve already had with some of you, there is going to be significant demand for these loans. We are diligently working on setting up processes to make the loan application and funding as smooth and expedient as possible.
- If you want to apply for these loans, please coordinate through our office. We are supposed to be able to act as your agents and help you through this process. As your agent, we will be able to provide services associated with these loans at no additional cost to you. I’ve already got 15 – 20 clients on our list, but I know there will be more. If you apply on your own, we will not be able to offer the same level of support or responsiveness.
Please keep in mind that the guidance on these programs is changing rapidly as everyone is scrambling to make these programs available. I’ve rewritten the information above multiple times since Monday as new guidelines have been released. Overall, this loan package is going to be tremendously helpful to many people and we are doing everything we can to make sure you are ready to apply once the loans are available.
Thank you for your continued trust in these turbulent times.