April 1, 2020 By SmartBiz Team

SBA Funding During COVID-19 Coronavirus
SBA 7(a) Paycheck Protection Program Loans

 
 

Apply For These New SBA loans

Paycheck Protection Program Loans outlined in the new CARES Act are available currently to the existing customers of banks in the SmartBiz Loans network. These loans are designed to mitigate the impact of the COVID-19 pandemic on small businesses. The following provides an outline to help you learn more about the current, key product features and requirements of these loans. Please note that SBA rules involving Paycheck Protection Program loans are subject to change given the nature of current events. You are encouraged to refer back to our site to learn more about relevant changes.

What is a CARES Act SBA Paycheck Protection Program (PPP) loan? Here is what you need to know about it.
The intent of the Paycheck Protection Program (PPP) is to cover approximately 8 weeks of payroll expenses through 100% federally guaranteed loans to small employers impacted by the COVID-19 pandemic.

  SBA 7(a) Paycheck Protection Program Loans
Covered loan period Retroactive to February 15, 2020, through June 30, 2020
Borrower requirements Any business with less than 500 employees (including sole proprietorships, independent contractors and self-employed), private non-profit organization, or 501(c)(19) veterans organization in business on February 15, 2020 that is affected by coronavirus/COVID-19.
Maximum loan amount Loan amounts can be for up to two and a half times the average monthly payroll costs for the business. Payments are to employees or to sole proprietors or independent contractors. That amount is subject to a $10 million cap. Seasonal or new businesses will use different applicable time periods to calculate. Payroll costs will be capped at $100,000 annualized for each employee.
Use of funds
  • Payroll costs
  • Health care benefits (incl. paid sick or medical leave, and insurance premiums)
  • Mortgage interest
  • Rent
  • Utilities
  • Interest on debts incurred before February 15, 2020
Term 2 years
Interest rate 1% fixed rate
Fees $0
Collateral None required
Personal guarantee None required
Payment deferral All payments (principal, interest and fees) will be deferred for a minimum of 6 months. Interest will accrue over the deferred period.
Application deadline June 30, 2020 or until funds allocated by the federal government are used up.

* The time period for new businesses would be January 1, 2020 to February 29, 2020

 

Frequently Asked Questions

How can SmartBiz help my business during the COVID-19 coronavirus outbreak?
SmartBiz works with a network of banks to help you apply for the funding you need now. With a streamlined application process and our professional team, we’re committed to helping you during this uncertain time.

What are the qualifications to apply for a Paycheck Protection Program loan?

  • A small business with fewer than 500 employees. The 500-employee threshold includes all employees—full-time, part-time, and any other status
  • A small business that otherwise meets the SBA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor, an independent contractor, or is self-employed who regularly carries on any trade or business
  • A tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard

What about SBA Affiliation Rules?
The CARES Act provides that the SBA Affiliation Rules will be waived with respect to any business operating:

  • As an approved SBA franchise.
  • As a business concern with not more than 500 employees that is assigned a NAICS code beginning with 72 (Accomodation and Food Service sectors)
  • As a business concern that receives financial assistance from a company licensed under section 301 of the Small Business Investment Act of 1958

Please see an overview of affiliation from the SBA here.

Do I need to first look for other funds before applying to this program?
No. The usual SBA requirement that you try to obtain some or all of the loan funds from other sources is being waived.

When can I apply?
Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.

How should a company prepare to apply?
Companies should begin collecting documentation and information related to its employee headcount, average monthly payroll costs and other permitted loan costs for the past year. For additional information, see the Treasury Department fact sheet.

 

Learn More About SBA 7(a) Loans

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You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to process your application by June 30, 2020.

How long will it take to process my request for an SBA 7(a) Paycheck Protection Program (PPP) loan?
Once the new application process is available for PPP loans, you can upload the required documentation quickly and easily. The quicker you complete the new application with the requested documents, the faster your loan will fund.

Does the loan need to be repaid, or is all or a portion forgivable?
The loan amounts will be forgiven as long as:

  • The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
  • Employee and compensation levels are maintained. Payroll costs are capped at $100,000 on an annualized basis for each employee.
  • No amounts paid outside of the covered period of the loan are forgivable.
  • You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan.
  • You will also owe money if you do not maintain your staff and payroll.

How do I count my total employees?
Applicants will count their own employees (including anyone employed on a full-time, part-time or other basis), and will exclude independent contractors. Independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.

For companies in the food services and bar industry, and for which there is more than one location, the company will be eligible if no one location has more than 500 employees.

What counts as payroll costs?
Payroll costs include:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee)
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
  • State and local taxes assessed on compensation
  • Payments to a sole proprietor or independent contractor: Wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee

Note on Affiliate employees
The applicant’s employee headcount will be aggregated with that of any “affiliates” and of any affiliates of an affiliate. The SBA considers entities “affiliates” of one another when one controls or has the power to control the other, or a third party controls or has the power to control both. The SBA’s conceptions of affiliation and control are more expansive than they are in the corporate context and in other legal regimes.

Are there other terms associated with a PPP loan?
No personal guarantee or collateral is required. The loans are fee-free, and payments of principal and interest are deferred for at least six months.

What if I rehire and/or raise salaries back to their prior level?
The act provides that where layoffs or salary reductions occurred between February 15, 2020, and April 26, 2020, the loan forgiveness reduction will not recognize those if the reductions in personnel or decrease in salaries are undone prior to June 30, 2020. We expect that the SBA will issue shortly clear guidance on how to calculate any reduction in loan forgiveness amounts.

Loan Forgiveness will look at three criteria:

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

Can a company also apply for an Economic Injury Disaster loan (EIDL) under the act?
During the period beginning on February 15, 2020, and ending on December 31, 2020, the applicant must not have received another SBA business loan for the same purpose and duplicative of PPP amounts applied for or received. Visit the SBA website for more information.
Economic Injury Disaster Loans and Loan Advance ›

How many loans can I take out under the Paycheck Protection Program?
Only one.

What other types of disaster funding is available to help businesses?
The Small Business Administration website has additional information on the types of funding available for small businesses during the coronavirus pandemic.
Coronavirus (COVID-19): Small Business Guidance & Loan Resources ›

 

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