Small Business Administration Loan Options from the coronavirus aid, relief and economic security (CARES) act
April 3, 2020
When the CARES Act was signed into law on March 27, 2020, included with the provision was additional $349 billion of funding that helps expand Small Business Administration (SBA) loan programs for small businesses, non-profits, veteran’s organizations, tribal businesses, sole-proprietors, self-employed, and independent contractors. Below is a list of the Paycheck Protection Program loan and the Economic Injury Disaster Loans.
| Paycheck Protection Program (PPP) | Economic Injury Disaster Loans (EIDL) | |
| Purpose | To help organizations impacted by COVID-19 maintain employees by helping with funding for payroll | To provide working capital for organizations impacted by disasters such as COVID-19. This was an expansion of a pre-existing program. |
| Eligibility | This program is for any small business (in existence as of February 15, 2020) with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), 501(c)(3) private non-profit organization or 501(c)(19) veterans’ organizations affected by coronavirus/COVID-19.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers. |
Expanded EIDL programs to include:
– Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees. – Now available to all private non-profit organizations 501(c)(d), or (e) – Individuals operating as sole proprietors or independent contractors.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ less than 500 workers. |
| Loan information | • No upfront fees
• 2.5x monthly payroll (excluding salaries above $100,000) – Up to $10 million • Up to 4% annual percentage rate • Term up to 10-years • No payment for first 6-12 months
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• No upfront fees
• $10,000 within 3 days (Advance) • Up to $2 million based on economic injury • Up to 3.75% annual percentage rate for for-profit organizations and 2.75% for non-profit organizations • Term up to 30-years • Can be deferred by 12 months automatically.
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| Allowable use | General payroll expenses, employee salaries, mortgage interest, rent and utilities, interest on debt
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Payroll expenses, employee salaries, fixed debts, payables, operating expenses
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| Collateral needed | No personal guarantees or collateral needed | Requires collateral over $25,000, but no personal guarantee necessary unless over $200,000
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| Forgiveness availability | Yes. If (A) it used within 8 weeks for allowable expenses, and (B) maintain headcount and employee compensation (employees that make less than $100,000 cannot be decreased by more than 25%). If these requirements are not met, the amount of loan allowed for forgiveness may be reduced.
Note: Not considered taxable income if forgiven |
None except for the $10,000 advance. If you are later not approved for EIDL, you can still keep the $10,000 and use it for allowable expenses.
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| How to apply? | Through an approved SBA Lender – available through June 30, 2020
https://www.sba.gov/partners/lenders/microloan-program/list-lenders
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Through SBA.gov website https://covid19relief.sba.gov/#/
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| Other limitations | If PPP is obtained, Company loses the Employee Retention Tax Credits. | • Cannot double dip qualified expenses with PPP.
• EIDL may be refinanced to PPP. • Amount forgiven for PPP will be subtracted by the $10,000 advance. • If amount is forgiven cannot use the payroll tax deferral provision
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For more information regarding these loans, please contact a Larson advisor.
Posted by
Andrew Wan, CPA, CFE
Andrew is an Audit Partner and the leader of our Emerging Industries and Small to Medium Sized Business Practice Groups. He is an expert in IT auditing services and compliance issues for a wide range of companies.
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