This article will be updated as more information becomes available, but we wanted to provide a simple overview of both SBA loan programs and IRS responses to the ongoing COVID-19 crisis.
I am not a fan of business debt and advise everyone to be cautious when receiving loans or tax credits, as they have specific purposes and repayment may be required sooner than the media would have you believe.
At a minimum, everyone that has experienced a loss of income related to businesses impacted by COVID-19 should apply for the $10,000 emergency grant explained under the SBA Emergency Injury Disaster Loan (EIDL).
SBA Economic Injury Disaster Loan (EIDL)
Purpose: Applying for this loan includes a $10,000 emergency grant to provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Grant funds will be made available within three days following a successful application and will not have to be repaid. The remaining loan can be paid over 30 years at 3.75% interest.
Notes: The “economic hardship” qualification is very broad but appears to capture most trucking businesses. We’ll continue watching this qualification for more precise definitions as they become available.
How to apply: https://covid19relief.sba.gov/
Can I apply for other SBA loan programs? Yes, but the amount forgiven under a Paycheck Protection Loan will be reduced by the $10,000 grant received as part of this EIDL.
What can I use an EIDL for? Basically anything. You have to prove that your business has had an economic injury, and once proven, the EIDL can be used for payroll, debt payments, rent, or other operating expenses.
What can I NOT use an EIDL for? You cannot use an EIDL to pay off any other federal debts.
SBA Paycheck Protection Program (PPP)
Purpose: The PPP is an SBA loan program that has $349 billion in funding to help small business owners make ends meet for the next two months. The application deadline is June 30, 2020. The loan has a two-year maturity at 1.0% interest. Loan payments will also be deferred for six months.
Timing: These loans can be made for the “covered period” of February 15, 2020, through June 30, 2020.
Maximums: The limit to the amount businesses can borrow is the lesser of:
2.5 times the average monthly payroll costs, or
If your business does NOT pay you via payroll, you cannot apply for the PPP loan until April 11 or later.
You must work with a bank to submit the application and documents. Find a bank that is accepting applications ASAP. Many banks are overwhelmed and have paused new applications.
Begin preparing your loan application (Version 3 was released 4/3/2020; use the latest version): https://www.sba.gov/document/sba-form–paycheck-protection-program-borrower-application-form
SBA resources for COVID-19 programs: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp
Our payroll clients have a report in their portal with the 2019 wage summary needed to apply.
Items you may need to apply:
2019 Form 940,
2019 quarterly and Q1 2020 Form 941 reports,
Articles of incorportation or organization,
Bylaws or operating agreements of entity,
Bank statements from January 2019 through February 2020,
12-month trailing Profit & Loss statement (if you only have an annual report, talk to your bank before working on this item to confirm it is required),
Current identification for the borrower.
We continue to watch the application process and will update you with any major changes. These funds are limited and many banks are overwhelmed.
Stay tuned and stay healthy!