SBA Small Business Relief

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, allocates $349 billion to help small businesses keep workers employed amid the current circumstances they are encountering. The CARES Act provides funding for the Paycheck Protection Program, modifies the existing Economic Injury Disaster Loan (EIDL) program and provides immediate loan payment relief for businesses with current SBA guaranteed loans.

The PPP Flexibility Act was signed into law on June 5, 2020 modifying the PPP’s covered period from 8-24 weeks and extending the term from 2-5 years.

The following is an overview of the key components and eligibility requirements of these programs:

Overview

SBA will pay the principal, interest, and any associated fees owed on SBA Guaranteed loans for 6 months, as follows:

  • For existing borrowers not on deferment: beginning with the next payment due on the loan.
  • For existing borrowers on deferment: beginning with the next payment due on the loan after the deferment period.
  • For new borrowers: beginning with the first payment due on the loan, but only for new loans made within the first six months starting from the date of enactment, March 27, 2020.

Eligibility: Businesses with 500 employees or fewer.

  • Current EIDL loans are capped at $150,0000
  • Loans can be made based solely on credit scores.
  • The interest rate on EIDLs will be 3.75% interest rate for small businesses.
  • The first twelve payments will be deferred and not become due until one year after the original disbursement. Interest does accrue during this time.
  • The term of these loans will be up to 30 years.

The EIDL Advance is no longer available.

  • For those that apply for the EIDL, an advance of $1,000 per employee (up to $10,000) is available.
  • The advance does not need to be repaid, even if the grantee is subsequently denied an EIDL.
  • Funds can be used to provide paid sick leave to employees, maintain payroll, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
  • Advances are available to small businesses, sole proprietors, independent contractors, tribal businesses, as well as cooperatives and employee-owned businesses in operation on 1/31/20.

The SBA guarantee will be 100% through the end of 2020. Payments will be deferred for the first 6 months. Loans will be administered through local and regional banks; any federally regulated bank may become an SBA lender for this purpose.

The interest rate is fixed at 1.0%.  Loans made after June 5, 2020, will have a 5-year term and loans made before then were 2-year terms but may be modified if borrower and lender mutually agree to do so.

Eligibility: Small businesses (as defined by SBA size standards, generally >500 employees, but  may be >1,500 employees depending on sector), sole proprietors, the self-employed, and independent contractors.

  • SBA’s standard “no credit elsewhere” test is waived. No personal guarantee or collateral required and no additional fees will be applied.
  • Loans up to $10 million. Amount is based on recent payroll costs (compensation paid to individuals, including self-employed). Compensation in excess of $100,000 a year to any individual is excluded.
  • Business must certify the loan will be used to retain workers, maintain payroll, make mortgage / lease payments, and pay utilities. 60% must be designated for payroll expenses, non-payroll costs cannot make up more than 40%.
  • Loans may be forgiven, up to an amount equaling eligible payroll, mortgage interest, rent and utility cost, incurred during a 24-week period starting from the date the borrower receives the funds. Compensation in excess of $100,000 a year to any individual, independent contractor or sole proprietor will not qualify.
    • Non-payroll costs cannot make up more than 40% of the loan forgiveness amount.
    • Loan forgiveness is reduced by layoffs or pay reductions in excess of 25%. 
    • Loan forgiveness is not treated as taxable income.
  • Lender must be an SBA Express Approved Lender, borrower must have a current relationship with lender.Fees are permitted and the SBA will guarantee 50% of the loan.
  • Businesses need to have been operational as of March 13, 2020. Proceeds to be used to reopen or ongoing survival of the business.
  • Collateral is not required, but a personal guarantee may be required. The loan is not forgivable.
  • Interest of the loan is prime + up to 6.5% and has a max term of 7 years.
  • The maximum loan amount is $25,000.

Comparison

Note: Information on this page was current as of publishing; however, information may be subject to change. Please check back frequently as information will continue to be added and updated.

Last Update: June 29, 2020

The University of Georgia Small Business Development Center (SBDC) has 17 offices across the state, covering every county, with consultants available to assist small business owners through the SBA Economic Injury Disaster Loan application process.

 

Many of our offices are working remotely, so if you do call and reach a voicemail, we will work to return your call as soon as possible. Please consider us a resource to assist you during these challenging times and let us know how we can be of service.