Here’s how to get a small business loan against the $ 349 billion coronavirus aid bill
A network of community banks and financial institutions across the country prepare to implement one of the most ambitious economic relief programs in U.S. history as small businesses across the country grapple with the coronavirus and its economic fallout.
The $ 2 trillion coronavirus relief program signed last week, officially known as the CARES Act, includes nearly $ 350 billion for a new federal small business loan program called the Paycheck Protection Program. The program is designed to get money into struggling small businesses quickly, with less paperwork and fewer safeguards than existing SBA loan programs. It is designed to entice business owners to keep their employees on the payroll by offering them a loan discount.
Business groups say lenders are moving as fast as they can to make loans available.
“Right now we’re focusing on speed to make sure these banks have the capacity to get loans on Main Street quickly,” said Tom Sullivan, vice president for small business policy in the House of Commons. American Trade, a group with the lenders who will distribute the funds, which are backed by a federal loan guarantee.
The new loan program is separate from existing federal loan programs, including the Small Business Administration Disaster Relief Loans. To learn more about other SBA aid programs, visit SBA Covid-19 Resource Center.
Here are the details on how small business owners can access the new “Federal Paycheck Protection Program”. This article will be updated as new information becomes available.
Q: How do I apply for a small business loan through the Paycheck Protection Program?
The Small Business Administration has a network of 1,800 approved lenders who process small business loans. If you are interested in a Paycheck Protection Program loan, you should first contact your bank to see if it is an SBA approved lender. If your bank is not an SBA approved lender, you can contact the SBA to find one.
Q: When will the new funding be made available to small businesses?
Treasury Secretary Steven Mnuchin told FoxBusiness Network on Monday that small business loans would be available from Friday. Detailed instructions on how to apply for them are to be added to the Small Business Administration’s website on Monday, Mnuchin said.
Mnuchin told daily White House news briefings that a system would be put in place for same-day loan appraisal.
However, Hicham Oudghiri, managing director of a small business-focused fraud detection and data analysis company called Enigma Technologies, said it would be difficult for most banks to achieve this without dramatically increasing the risk of fraud. Most small businesses will take days to gather the documents they need to apply, he said.
“Even the most sophisticated banks will find it difficult to shorten their processes to get money out so quickly,” Oudghiri said.
Q: Which companies are eligible for the Paycheque Protection Program?
Small businesses, nonprofits, tribal businesses that meet the SBA standard business size definition, and veterans organizations organized under 501 (c) (19) with less than 500 employees are eligible for loans under the program. Self-employed workers, independent contractors and sole proprietors are also eligible. To receive a loan, your business must have been in business since February 15, 2020.
If you’re in the restaurant business, the 500 employee cap is applied per physical location, according to a fact sheet released by the United States Chamber of Commerce.
There are criminal penalties for submitting false information on loan applications.
Q: How much money can my business receive through the new loan program?
The Paycheck Protection Program provides small business loans of up to $ 10 million to cover payroll and certain other expenses. Other SBA loan programs, including the Federal Disaster Relief Program, offer much smaller loans.
Q: How long are Paycheck Protection Program loans covered?
The new loans apply to expenses incurred retroactively from February 15, 2020 to June 30, 2020.
Q: Can the loan possibly be canceled?
Yes. The law includes a loan forgiveness for businesses that are able to keep their employees on the payroll or continue to pay bills throughout the coronavirus crisis.
The amount of the loan forgiveness will include salary costs for people with an annual income of less than $ 100,000, mortgage and rent obligations, including interest and utility payments. The total amount will be reduced if your workforce is reduced by attrition or if wages are reduced. If you are forced to lay off employees due to economic conditions, you may be able to keep some of your loan collateral by rehiring them.
Eligibility for loan cancellation begins eight weeks after the loan inception date. There is a maximum term of 10 years after the loan forgiveness request.
Q: What is the interest rate?
The maximum interest rate for the Paycheck Protection Program is 4%.
Q: It seems that there are many different federal loan programs. Can my business be funded by more than one?
Yes. Businesses that have pending or existing SBA disaster assistance loans can still receive funding through the Paycheck Protection Program as long as the loans are applied to different cost centers. You can also apply for a loan if you have an outstanding insurance claim.
Q: What do these loans cover?
Loans through the Paycheck Protection Program can cover salary costs, mortgage and rent payments, health care benefits for employees, including, but not limited to, paid sick leave. In some cases, it can also cover interest on other debts your business may have.
Q: What if I still pay off another SBA disaster loan?
The Small Business Administration has made all postponements automatic until December 31. This means that small business owners do not have to contact the SBA to request a deferral.
Your primary point of contact for information on federal loan programs should be the US Small Business Administration or an SBA-qualified financial institution. You can reach the SBA by email at [email protected] or by phone at 1-800-827-5722. The agency said it has received “unprecedented” interest in its loan program in recent weeks, but is working to set up new call centers to handle the flood of new requests.
Several business groups have also published fact sheets on SBA loan programs, including the Economic Innovation Group and the American Chamber of Commerce.