Overview for School Owners to Access New Federal Loan Programs for Small Businesses
Information as of 11:30 a.m. CST, April 3, 2020
Bailey Routzong has compiled the below information on two new Federal loan programs available to small business owners (less than 500 employees).
Economic Injury Disaster Loan-“EIDL”
This loan is to reimburse businesses for operating expenses that have occurred during the Covid 19 pandemic period and the business shutdown requirements by the government. This loan is processed only on-line through the Small Business Administration. On the EIDL application there are two types of funding; the first is a $10,000 grant that the applicant can choose that the SBA current represents will be funding within 3 days. However, if this grant (no repayment required) is chosen you will not be able to complete the application for additional loan funds at that point in the process.
An SBA officer will subsequently contact you by telephone to confirm the initial grant and at that time you can choose to extend your application for additional funds. That additional application may require submittal of both personal and business entity financial statements. Our current understanding is that the loan can cover a wide range of business expenses (fixed debt obligations, payroll, rent or mortgage payments, or other obligations the applicant has not been able to meet due to the loss of revenues).
The maximum loan available under this program is $2 million. The interest rate is 3.75% with a 30 year payment term; however, no payments are due in the first 12 months of the loan. The SBA is currently representing that the decision on your loan application will take 4 weeks.
The small business owner can apply for both the EIDL and PPP loans as long as the expenses to be covered by the loan are not duplicated.
Paycheck Protection Program-“PPP”
This loan program will be available as of Friday, April 3. This loan is to be accessed through your commercial bank, and has been represented as same-day approval.
The program is to cover 8 weeks of full payroll for your business plus utilities, and rent or mortgage interest. Payroll can include the owner’s salary if the owner has been receiving such from the company. If the owner maintains full employment for the 8 week period, this loan may be forgiven at the completion of the period.
This loan is for a 2 year period at a 1% interest rate; however, no payments are due for the first 6 months of the loan. This loan can be fully forgiven if 75% of the loan amount has been used for payroll purposes.
The small business owner can apply for both the EIDL and PPP loans as long as the expenses to be covered by the loan are not duplicated.
Disclaimer: the above information is not intended to be exhaustive to every rule and regulation of this new legislation. It is an overview only to provide a general understanding of these programs and how to access them. BR recommends that the reader consult with their CPA to discover all of the rules and regulations of these programs and how to best utilize them to their benefit.
