Recently, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) with the goal of preventing job loss and small businesses failure due to losses caused by the Coronavirus. Check out the below highlights of each program that might be helpful to your business if it has been impacted by the pandemic, or learn more directly on the SBA’s website.
Paycheck Protection Program (PPP): The PPP is intended to help businesses with fewer than 500 employees (with some exceptions) by lending them up to two months of payroll costs, with each loan capped at $10 million. These relief loans are issued through Small Business Administration-approved lenders and do not require any personal guarantee or collateral from borrowers.
• The money is intended to primarily cover payroll, but funds can be used for other business expenses as long as the loan is repaid at an interest rate of 1% over two years.
• Borrowers are eligible for loan forgiveness on costs paid during the eight-week period after the PPP is originated for (1) payroll costs, (2) payment of interest on pre-existing mortgage obligations, (3) covered rent obligations, and (4) utility payments in place prior to February 15, 2020.
• The federal government has expressed that it will forgive the loans if a business uses at least 75% of the funds to maintain its payroll at pre-pandemic levels for eight weeks after the loan is disbursed (based on a 40-hour workweek).
• If you already received an EIDL loan (between January 31, 2020 and April 3, 2020), you can still apply for a PPP loan as long as they are used for different expenses.
Economic Injury Disaster Loan Emergency Advance (EIDL). This is not a new loan. The EIDL existed prior to COVID-19 for companies that suffered a substantial economic injury. Once the President declared the entire country a disaster area, the loan became available for small businesses (less than 500 employees with some exceptions) experiencing financial difficulties due to the COVID-19 pandemic.
• The EIDL is a loan intended to cover six months of your operational expenses, including utilities. In comparison, the PPP is a loan to primarily help you cover payroll for eight weeks. Interest rates are capped at 3.75% for small business and 2.75% for nonprofits.
• Although it may take time to apply, you can apply for an emergency grant advance of up to $10,000 – the SBA indicates on its website that you can receive this advance in as little as three days. This loan advance will be forgiven if spent on qualifying expenses.
• There are some important conditions for receiving this loan. For instance, similar to other COVID-19 funding programs, you cannot double-dip. If you are taking a tax credit for qualified sick and family leave wages under the Families First Coronavirus Act, you cannot use the EIDL for these same expenses.
• Loans of $25,000 or less require no collateral. Personal guaranty is waived for loans up to $200,000 through December 31, 2020.
SBA Disaster Bridge Loans. These loans enable small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. If you are waiting on a decision and disbursement for an Economic Injury Disaster Loan, consider applying for the SBA Disaster Bridge Loan.
• This loan can provide support for small business to help overcome temporary loss of revenue.
• Loan can be used as a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster Loan.
• The loan will be repaid in full or in part by proceeds from the EIDL loan.
Existing SBA Loans. If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020.
AmeriGas is not providing tax, banking or legal advice in this communication. We are sharing information and since CARES is a technical tax law, we encourage you to talk with your tax or other professional advisor about your eligibility for these loan programs.