SBA Disaster Financial Relief for U.S. Small-Mid Size Businesses

The CARES Act signed by President Donald J Trump on March 27, 2020, provides approximately $2.2 trillion of fiscal stimulus, that provided $350 billion to aid U.S Business. The bill was expanded on April 23, 2020 to provide an additional $484 billion of coronavirus-relief funding, including an additional $320 billion for the government-backed SBA Paycheck Protection Program (“PPP”).

Businesses across most industries have been affected in one way or another. From being unable to keep staff employed to being unable to cover monthly expenses such as payroll, rent and utilities.

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SBA Disaster Financial Relief for U.S. Small-Mid Size Businesses


Armed with an additional $350 billion in its war chest, the SBA has rolled out three loan programs: the SBA Paycheck Protection Program, SBA Disaster Loans Program, and the SBA EIDL Cash Advance Program. These programs will provide loan guarantees of up to 100% of the loan amount to the bank and non-bank lenders for them to finance these COVID-19 Disaster Relief Loans to U.S for-profit Businesses affected by the COVID-19 pandemic.

Please read below on how either program Paycheck Protection Program, SBA Disaster Loans, Community Advantage or EIDL Cash

The advance could help your business today!

What is the SBA Paycheck Protection Program?

The SBA PPP is a program that will provide up to a 100% loan guarantee to the bank and non-bank lenders that finance U.S Business affected by the COVID-19 shutdown.

SBA PPP loans will help small businesses maintain payrolls and continue necessary payroll-related payments like rent and utilities. The full allowable uses of the loan are:

  • Payroll costs: Compensation in the form of salaries, wages, commissions (or similar compensation), cash tip payments (or the equivalent)
  • Healthcare costs: Any costs related to the continuation of group healthcare benefits, including insurance premiums
  • Mortgage interest payments (but not payments on the mortgage principal)
  • Rent
  • Utilities

Could companies use The SBA PPP Program?

For-Profit U.S based Businesses, including sole proprietors and independent contractors. Companies that have a min of one year in a business that was open as of February 1, 2020.

How Does the SBA PPP Loan Program work?

The SBA PPP Loan program will follow the same guidelines of the SBA 7(a) program to provide up to a 100% loan guarantee to a bank or non-bank lender that funds a business loan to a U.S Business.

The Cares Act allows for pared-down SBA requirements for PPP loans. For example, typically, the SBA would guarantee up to 85% of the loan to the bank or SBA Preferred Lender for most other SBA loan products. This is why SBA PPP loans are eligible to be forgiven, up to 100% of the loan principal. Under the SBA PPP Loan program, the allowed funded amounts would be for the lesser of either 2.5 average monthly payroll costs over the last trailing 12 mos of the application or $10mm. The goal of the SBA with the PPP Loan program is to assist anywhere from 8-10 weeks of a business' payroll costs.

If a business manages to keep their staff employed, the loan may be entirely forgiven, converting it to a grant. If businesses are unable to keep their staff employed, businesses have to service the loan but will have payments for this deferred for the first year. Once a business provides the necessary paperwork required, the SBA expects to offer a swift response to companies in need. Further inquiries can be directed to the SBA’s PPP Loan Program FAQ page.

What are the benefits of the SBA PPP Loan Program?

Loan Proceeds may be used to pay certain business expenses, including payroll, employee benefits, rent, utilities, and interest on mortgage and debt obligations.

Fast turnaround time compared with most SBA loan products.

Loan amounts may be forgiven if they're used to cover payroll costs, most mortgage interest, rent, and utility costs during eight weeks after the loan is granted.

The program will cover up to $100k per year in salary per employee.

Payroll Protection Program Forgiveness Explained

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, 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 1%.

If you wish to begin preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender.

SBA PPP Loan Eligibility Requirements

  1. A registered for-profit business, operating legally. Your business (or non-profit) was in operation as of February 15, 2020
  2. As per the SBA 7(a) guidelines business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years
  3. Company is an independent contractor or sole proprietor, or the business/organization has either employees or independent contractors for whom they have associated payroll costs
  4. Proof of payroll expenses for the trailing 12 mos of the date of the SBA PPP loan application.

SBA PPP Loan Program Quick Notes


This new program is due in part to the CARES Act stimulus package. The SBA created to cover the payroll costs, lease and interest on mortgages or rent payments, and utilities for businesses dealing with the impact of the COVID-19 / Coronavirus epidemic. The SBA PPP Loan will cover up to 10 weeks of a business's payroll costs and other approved expenses. This will be done via a term loan for up to 10 years with a 4% interest rate. Payments for this program may be deferred for the first year. If a business keeps its employees for four months, then the entirety of the loan may be forgiven, essentially converting the loan into a grant to help stabilize U.S. businesses. Further details can be found at the SBA’s PPP Loan FAQ page.

4% if not forgiven

0% if forgiven

Up to 10 years

Up to $10,000,000

Not required

0%

Frequently Asked Questions


The SBA Disaster Relief Loans program provides loan guarantees of up to 100% of the loan amount to the bank and non-bank lenders to offer financing to U.S Businesses affected by a disaster. The funds can be utilized to pay for sick leave of employees who are unable to work due to a direct effect of COVID-19, other accidents, the company's materials, fixed debts, payroll, accounts payable, and other bills that can't be paid because of the disaster's impact.

For a for-profit and non-profit U.S Business affected by a pandemic, natural disaster, or other hardship, you or your business may be able to qualify for disaster relief. Speculative companies (i.e., investment real estate companies are not eligible). Borrowers also cannot be involved in religious indoctrination, agriculture, gambling, etc.

The SBA provides a loan guarantee of up to 100% of the loan amount to a bank or non-bank lender that funds a U.S. Business affected by a disaster.

Businesses need to submit a claim to their insurance company and get started with the process of determining what insurance will payout.

The SBA will only pay for damage that is not covered by insurance, but you can begin the loan process before you know the amount repaid by insurance. You may be able to apply for the SBA loan and agree to use insurance proceeds to repay or reduce it.

The Loan amounts can be for up to $2,000,000.00. The terms can be up to 30 years, the longest of the Small Business Administration. SBA Disaster Loans also have some of the lowest interest rates on the marketplace ranging from 3.75% and 2.75% for non-profit companies. Loan payments are generally deferred for the 1st year after the contract is signed.

SBA Disaster Relief Loans come in two forms:

  1. Physical disaster loans: These are used to replace or repair physical damage. The tangible property includes real property (land and buildings), machinery and equipment, fixtures, inventory, and leasehold improvements. These are commonly used after a natural disaster.
  2. Loans for economic recovery (including the coronavirus epidemic): These are designed to help small businesses meet ordinary and necessary financial obligations that can't be achieved as a direct result of the disaster.

Economic recovery loans usually take the form of working capital loans for operating expenses to help small businesses survive during the recovery process.

It provides a lifeline to businesses affected by things beyond their control in dire need of relief.

First, you need to determine if you are in a declared disaster area. The federal government, the SBA, and the Secretary of Agriculture can maintain a city as a designated disaster area. Check the list of current designated disaster areas to see if your area is included.

  • A business loan application (SBA Form 5)
  • An IRS Form 4506-T for each applicant (the business) and each of its owners (the requirements for who must submit this form differ depending on the type of business and the number of owners)
  • The IRS Form 4506-T can be replaced with the IRS Form 8821. Applicants should fill out one of the two. Either form is acceptable. These forms authorize the SBA to independently verify an applicant’s tax information.

Additional documents needed for your company and the applicants include:

  • A complete copy of the most recent federal income tax returns for the business, including all schedules
  • A personal financial statement (SBA Form 413) for each owner of the business
  • A schedule of liabilities (you might use SBA Form 2202) with current status and balance
  • A current year-to-date profit and loss statement for the business
  • Current sales figures on SBA Form 1368

SBA Disaster Loan Program Quick Notes


If a business is affected by a pandemic, damaged, or destroyed due to a hurricane, flooding, fire, or drought, you could qualify for an SBA Disaster Loan. To qualify, the owners will need to prove that the business is in a declared disaster area. Also, the SBA will want to know how the business has been negatively affected by this disaster. For example, if you have damaged property or need to repair or replace equipment.

8%

30 Years Max

Up to $2,000,000

Varies

0.00-3.75%

What is the SBA EIDL Cash Advance?

Due to the COVID-19 pandemic, the Economic Injury Disaster Loan is providing an emergency relief of up to $10,000. This grant is not a loan and can take as little as 72 hours to hit your account. The benefit of these grants is that it does not have to be repaid as long as funds are utilized for:

  • Payroll and paid sick leave to employees unable to work due to the effects of COVID-19
  • Increased costs from new suppliers due to interrupted supply chains
  • Rent or Mortgage Payments
  • Repaying obligations that cannot be met due to revenue losses

What are the companies that use the SBA EIDL CASH ADVANCE Program?

For-profit valid use business. Must have been in business before February 1, 2020, Business was affected by COVID-19. The company must have less than 500 employees. All businesses must apply before December 31, 2020.

SBA EIDL PROGRAM Quick Notes


Free

None

$10,000

Not required

$0

  • A business loan application (SBA Form 5)
  • An IRS Form 4506-T for each applicant (the business) and each of its owners (the requirements for who must submit this form differ depending on the type of business and the number of owners)
  • The IRS Form 4506-T can be replaced with the IRS Form 8821. Applicants should fill out one of the two. Either form is acceptable. These forms authorize the SBA to independently verify an applicant’s tax information.

Additional documents needed for your company and the applicants include:

  • A complete copy of the most recent federal income tax returns for the business, including all schedules
  • A personal financial statement (SBA Form 413) for each owner of the business
  • A schedule of liabilities (you might use SBA Form 2202) with current status and balance
  • A current year-to-date profit and loss statement for the business
  • Current sales figures on SBA Form 1368

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Additional Funding Options


In addition to the financial loan programs provided by Congress with the support of the Small Business Administration due to the Coronavirus/ COVID-19 outbreak. The SBA has 12 loan programs that provide loan guarantees to lenders to motivate lending to the small and mid-sized business community. Since 1953 the U.S Small Business Administration has been a real financial backer to U.S Small Businesses. Hyperlink to our SBA Financing home page

We have a very seasoned team heading our SBA Loan Brokerage division. Working hand in hand with some of the nation's top banks and SBA Preferred Lenders to ensure our clients can take full advantage of the additional $350 million dollar; the SBA has to offer under the recently added the signed CARES Act.

Please apply online, email us for an appointment, or call us today Insert the phone Hyperlink the home page

Coronavirus Funding Options


Click here to learn more about available SBA loan and debt relief options.

Our nation's small businesses are facing an unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak. On Friday, March 27, 2020, the President signed into law the CARES Act, which contains $376 billion in relief for American workers and small businesses.

To learn more about the relief options available for your business, click here.

The President's Coronavirus Guidelines for America - 30 Days to Slow the Spread

Put this towards the bottom

The Centers for Disease Control and Prevention (CDC) offers the most up-to-date information on COVID-19. This interim guidance is based on what is currently known about the coronavirus disease 2019 (COVID-19). For updates from CDC, please see the following:

  • Interim Guidance for Businesses and Employers to Plan and Respond to Coronavirus Disease 2019 (COVID-19)
  • Preventing Stigma Related to COVID-19
  • Share Facts about COVID-19
  • CDC Coronavirus Disease 2019 (COVID-19) Web page
  • Information on Coronavirus Disease 2019 (COVID-19) Prevention, Symptoms and FAQ

The following interim guidance may help prevent workplace exposures to acute respiratory illnesses, including COVID-19, in non-healthcare settings. The guidance also provides planning considerations if there are more widespread, community outbreaks of COVID-19.

To prevent stigma and discrimination in the workplace, use the guidance described below and on the CDC’s Guidance for Businesses and Employers web page.

Below are recommended strategies for employers to use now. In-depth guidance is available on the CDC’s Guidance for Businesses and Employers web page:

  • Actively encourage sick employees to stay home
  • Separate sick employees
  • Emphasize staying home when sick, respiratory etiquette and hand hygiene by all employees
  • Perform routine environmental cleaning
  • Advise employees before traveling to take certain steps
    • Check the CDC’s Traveler’s Health Notices for the latest guidance and recommendations for each country to which you will travel. Specific travel information for travelers going to and returning from designated countries with risk of community spread of Coronavirus, and information for aircrew, can be found on the CDC website.
  • Additional Measures in Response to Currently Occurring Sporadic Importations of the COVID-19:
    • Employees who are well but who have a sick family member at home with COVID-19 should notify their supervisor and refer to CDC guidance for how to conduct a risk assessment of their potential exposure.
    • If an employee is confirmed to have COVID-19, employers should inform fellow employees of their possible exposure to COVID-19 in the workplace but maintain confidentiality as required by the Americans with Disabilities Act (ADA). Employees exposed to a co-worker with confirmed COVID-19 should refer to CDC guidance for how to conduct a risk assessment of their potential exposure.

Common Issues Small Businesses May Encounter:

  • Capital Access – Incidents can strain a small business's financial capacity to make payroll, maintain inventory and respond to market fluctuations (both sudden drops and surges in demand). Businesses should prepare by exploring and testing their capital access options so they have what they need when they need it. See SBA’s capital access resources.
  • Workforce Capacity – Incidents have just as much impact on your workers as they do your clientele. It’s critical to ensure they have the ability to fulfill their duties while protected.
  • Inventory and Supply Chain Shortfalls – While the possibility could be remote, it is a prudent preparedness measure to ensure you have either adequate supplies of inventory for a sustained period and/or diversify your distributor sources in the event one supplier cannot meet an order request.
  • Facility Remediation/Clean-up Costs – Depending on the incident, there may be a need to enhance the protection of customers and staff by increasing the frequency and intensity by which your business conducts cleaning of surfaces frequently touched by occupants and visitors. Check your maintenance contracts and supplies of cleaning materials to ensure they can meet increases in demand.
  • Insurance Coverage Issues – Many businesses have business interruption insurance; Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
  • Changing Market Demand – Depending on the incident, there may be access controls or movement restrictions established which can impede your customers from reaching your business. Additionally, there may be public concerns about public exposure to an incident and they may decide not to go to your business out of concern of exposing themselves to greater risk. SBA’s Resources Partners and District Offices have trained experts who can help you craft a plan specific to your situation to help navigate any rapid changes in demand.
  • Marketing – It’s critical to communicate openly with your customers about the status of your operations, what protective measures you’ve implemented, and how they (as customers) will be protected when they visit your business. Promotions may also help incentivize customers who may be reluctant to patronize your business.
  • Plan – As a business, bring your staff together and prepare a plan for what you will do if the incident worsens or improves. It’s also helpful to conduct a tabletop exercise to simulate potential scenarios and how your business management and staff might respond to the hypothetical scenario in the exercise. For examples of tabletop exercises, visit FEMA’s website at: https://www.fema.gov/emergency-planning-exercises

Local Assistance


SBA works with a number of local partners to counsel, mentor, and train small businesses. The SBA has 68 District Offices, as well as support provided by its Resource Partners, such as SCORE offices, Women’s Business Centers, Small Business Development Centers and Veterans Business Outreach Centers. When faced with a business need, use the SBA’s Local Assistance Directory to locate the office nearest you.