Updated October 21, 2020
The CARES Act established several new Small Business Administration (SBA) programs to address the COVID-19 outbreak. Find them below:
In response to the Coronavirus (COVID-19) pandemic, small business owners and non-profit organizations in all U.S. states, Washington D.C., and territories are able to apply for an Economic Injury Disaster Loan (EIDL). EIDL is designed to provide economic relief to businesses that are currently experiencing a temporary loss of revenue. EIDL proceeds can be used to cover a wide array of working capital and normal operating expenses, such as continuation to health care benefits, rent, utilities, and fixed debt payments.
SBA resumed accepting new Economic Injury Disaster Loan (EIDL) applications on June 15 to all qualified small businesses, including U.S. agricultural businesses.
If you have already applied via the streamlined application portal, please do not resubmit your application.
Update: The Paycheck Protection Program closed Aug. 8, 2020. As such, SBA is no longer accepting PPP applications from participating lenders. Stay tuned for any changes that may occur as a result of future legislation.
The Paycheck Protection Program (PPP) is a new, temporary loan program authorized under the CARES Act, administered through the Small Business Administration, and designed to provide a direct incentive for small businesses to keep their workers on payroll.
The PPP provides each small business a loan of up to $10 million for payroll and certain other expenses. The loan amounts will be forgiven as long as the loan proceeds are used to cover payroll costs, mortgage interest, rent, and utility costs over the eight-week period after the loan is made, with employee and compensation levels maintained. Borrowers must work with their local lenders to establish loans, track use of proceeds, comply with documentation requirements, and to request loan repayment.
The PPP loan can be forgiven up to the full principal and accrued interest if the borrower maintains or quickly rehires employees and maintains salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. The SBA began approving PPP forgiveness applications on October 2, 2020.
Loans can be used for payroll costs, mortgage interest, rent payments on leases, and utility payments over the 24-week period following the date of the loan. However, at least 60% of the forgiven amount must be used to cover payroll costs; not more than 40% of the loan forgiveness amount can be attributable to nonpayroll costs.
Businesses have until December 31, 2020, to rehire workers in order for their salaries to count toward forgiveness and are given protection from reductions in loan forgiveness if they cannot find qualified employees to hire or rehire by December 31, 2020. Borrowers have five years to repay the loan, at 1% interest.
Submit a request to the lender that is servicing the loan. There are three loan forgiveness applications, each with specific use criteria. Download instructions from this site. The SBA has revised the existing Loan Forgiveness Application form and instructions and added an EZ Loan Forgiveness Application form and instructions as well as a new application (SBA Form 3508S) and instructions for PPP loans of $50,000 or less. The 3508S is intended to simplify the loan forgiveness process by requiring fewer calculations and less documentation. Also, borrowers who use SBA Form 3508S are exempt from reductions in loan forgiveness amounts based on reductions in FTE count or salaries/wages.
The request will include documents that verify the number of full-time-equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations.
You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The SBA has clarified that any borrowers that received PPP loans with an original principal amount of $2 million or less are deemed to have made the loan request in good faith. The SBA established this safe harbor because such borrowers are unlikely to have adequate sources of liquidity. The SBA will focus on larger loans for audit purposes.
The lender must make a decision on the forgiveness within 60 days.
Additional resources include: