From a Small Business Administration announcementPresident Trump has signed a bill providing additional funds for SBA programs providing COVID-related disaster assistance to small businesses:
The Paycheck Protection Program (PPP) will receive an additional $310 billion – with $60B of that set aside for distribution by smaller banks, credit unions, and Community Development Financial Institutions.
The Economic Injury Disaster Loan (EIDL) and EIDL Advance will receive an additional $50 billion of EIDL loan subsidy funds, plus $10B in additional EIDL advances.
One important change in EIDL contained in the bill makes agricultural producers eligible for EIDL assistance.
What’s next? When funds ran out on 4/16, SBA shut down both the PPP and EIDL application portals to new applicants. When new funds are deployed, SBA will reopen both portals. The PPP portal is now open.
Paycheck Protection Program Program recap. PPP is a forgivable loan from your business’s banking institution for an amount equal to your business’s typical 2-1/2 months’ payroll. Eligible borrowers include small businesses–including agricultural operations–and nonprofits, including faith-based organizations. The loan may only to be used to pay payroll, business rent/mortgage interest, or utilities (nothing else). If after 8 weeks you show your lender that at least 75% of the loan was used indeed for payroll and not more than 25% was used for the other authorized purposes, the loan is forgiven by the lender. If any of the loan is not forgiven (e.g. because you used more than 25% of the loan for the non-payroll purposes), the repayment is based on 1% interest, 2-year term, first payment deferred for 6 months. Neither collateral nor personal guaranties are required, and there is no “means test” to qualify. All the rules are published here.
Minor changes. A few minor changes to the PPP program were published in a supplemental Interim Final Rule today: All legal gaming businesses are eligible regardless of what % of their revenue come from gambling. ESOP-owned businesses are eligible.Hospitals owned by state/local governmental entities are eligible provided they don’t get 50% or more of their revenues from their governmental owners (exclusive of Medicaid).Businesses in bankruptcy, including businesses with any owner in bankruptcy, are ineligible.Hedge funds and private equity firms are ineligible for PPP. Portfolio companies of private equity funds were reminded to closely verify their eligibility before applying.And several more FAQ’s were also issued today:Agricultural producers are confirmed to be eligible provided they either have not more than 500 employees or otherwise meet SBA “small business” size standards. Cooperatives are eligible.
Economic Injury Disaster Loan (EIDL) and Advance Program recap. EIDL is a direct loan from SBA for lost revenue/gross profit due to the COVID disruption of your normal operations. The loan amount is set by SBA based on an estimate of lost cash flow due to the disruption. The EIDL loan is for business working capital needs not covered by PPP. The repayment is based on 3.75% interest (2.75% interest for nonprofits), up to 30-year term, first payment deferred for 12 months. The program’s initial collateral, personal guaranty, and “credit elsewhere” requirements have been loosened substantially. An “up to $10,000 Advance” feature was added to the EIDL loan program by the 3/27/2020 CARES Act. Every business certifies they meet the basic EIDL eligibility requirements and requests an advance in their application will receive a forgivable advance payment of $1,000 per employee, up to the $10,000 maximum. The advance is designed to be an advance disbursement on the full EIDL loan that will ultimately be delivered once your EIDL application is processed. Even if SBA ultimately decides you do not qualify for a full EIDL loan, the advance normally will not need to be repaid. SBA is making every effort to disburse these advances shortly after each EIDL application is submitted. The EIDL rules are here.
Program changes. Agricultural producers are now eligible for EIDL assistance. .
To apply for EIDL assistance, watch the SBA EIDL program page for the reopening of the EIDL application portal – https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/economic-injury-disaster-loan-emergency-advance.