SBA Loan Summary of benefits and requirements
Bruce Claassen
April 1, 2020
The Small Business Administration (SBA) and the Department of Treasury have begun releasing the information that will guide the programs created through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Below is a summary of what the programs are, and how they might benefit you:
Economic Injury Disaster Loan (EIDL):
Declaration must first be made by state Governor to SBA with approval process to follow.
Loans available up to $2 million.
Loan interest rates are 3.75% for small businesses and 2.75% for nonprofits (currently, there is no provision to lower the rates).
Employers with 500 employees or less are eligible.
Maximum loan term of up to 30 years (term is determined on a case-by-case basis).
Must have applicable credit history.
Must show the ability to repay loan.
Collateral is required for loans over $25,000. SBA accepts real estate as collateral when applicable. SBA will not decline a loan for lack of collateral and will require borrower pledge collateral that is available.
Paycheck Protection Program Loans (PPPL):
Loans available up to $10 million.
Loan amount is calculated at 2.5 times average payroll expenses over a 12-month period.
Loan interest rates capped at 1% (Original rate under Cares Act was capped at 4%)
Maximum loan term of up to 2 years (Original term in the Cares Act allowed 10 years). The term is determined on a case-by-case basis.
Must show the ability to repay loan. Note: CARES Act deferment of payment is automatically 6 months and up to 1 year.
Loan forgiveness is a percentage of payroll costs, rent or mortgage interest, utilities, and other debt interest for the 8 week period after the loan originates. (Payroll must be 75% of total)
Businesses who receive Paycheck Protection Program loans to cover employee salaries, payroll support, mortgage or other debt obligations cannot also receive EIDL loans for the same purpose.
There are many fine points that you must navigate with these loans and a significant amount of information you must gather to submit. Please contact us for more information, and if you would like assistance with your application process. We are here to help.