As of May 18, 2020, the PPP Loan Forgiveness Application is now available on the SBA site. Apply here.

View the most up-to-date information in the PPP FAQ from the SBA and the Department of the Treasury, most recently updated on May 13, 2020.

On Friday, March 27, 2020, the president signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. This stimulus package promises multiple avenues of relief that will be available to small businesses through programs administered by the Small Business Administration (SBA). As several small businesses undergo financial pressures due to the extended social distancing guidelines, financial emergency relief measures are now in place. Here is a summary of the critical relief resources you need to know.

Congress has appropriated $349 billion of the $2 trillion stimulus package for The Paycheck Protection Loans Program (PPL) to provide loans for qualified small businesses. The maximum amount of loan principal available is the lesser of 2.5 times the average total monthly payments for payroll costs during the one year before the date the loan is made or $10 million. These loans are forgivable if the borrower maintains employees and otherwise complies with the CARES Act.

In addition to small businesses, sole-proprietors, independent contractors, and other self-employed individuals are eligible for these loans. Non-profits and churches designated as 501(c)(3) organizations may also participate in the PPL program, while 501(c)(6) organizations are not eligible.

The loan may be used for eligible payroll costs which include amounts paid for salaries, commissions, paid time off, parental and sick leave (excluding sums for which tax credits under the FFCRA are claimed), retirement benefits, and state and local payroll taxes paid. These loans may also pay for continuing health benefits, interest on a mortgage obligations for real or personal property, rent, utilities, and interest on any debt incurred before February 15, 2020. However, the loan may not be used to make prepayments on mortgage principal.

These loans may not require a personal guarantee or collateral and will not be subject to loan or prepayment fees. Lenders may grant deferment of loan payments for at least six months, but not more than 12 months.

In addition to the creation of the PPL to help small businesses, the CARES Act allotted $10 billion for Economic Injury Disaster Loans (EIDLs). Although this program is not new, this is the first time a pandemic has been defined as a disaster. Because of that, businesses in every state are now eligible to apply for EIDLs to make it easier for companies to gain access to funding.

Among several changes to the EIDLs, a key benefit for businesses is that borrowers can receive $10,000 in an emergency grant cash advance. This amount is forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments, or repaying obligations that cannot be met due to revenue loss. View this helpful emergency loan checklist prepared by the U.S. Chamber of Commerce.

For more details on EIDLs and information on how to apply for these loans, please visit the Small Business Administration’s disaster assistance website.

Learn more about loan forgiveness under the CARES Act here.

The application and instructions for the Paycheck Protection Program (PPP) under the CARES Act was recently published by the Treasury Department. All businesses, including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors with
500 or fewer employees can apply starting April 3, 2020.

The demand for economic assistance is exceptionally high. If you think you need funding now or in the future, apply quickly. Both support programs can provide a boost to a struggling organization. If you need assistance in modeling your cash-flow or have questions on the current financial state of your business, please contact your Aldrich Advisor. We are monitoring the effects of COVID-19 closely and will continue to provide updates. For more resources, please visit our COVID-19 Resource Center.

This article is a broad overview of options available for small business loans in response to COVID-19 and provides general information to our clients and friends. It should not be relied upon for legal advice.