The $2 trillion Coronavirus aid package incorporates close to $350 billion for small business loans, here’s what you need to know about those loans…
SBA Loan Forgiveness? Benefits of Aid Package SBA Loans
There is no doubt that small businesses are suffering under the impact of Coronavirus and $349 billion of the recently passed $2 trillion aid bill (referred to as the CARES Act) aims to relieve some of that impact. The $349 billion set aside for small business loans is being offered to small businesses through a program called the “Paycheck Protection Program”. PPP small business loans aren’t your average small business loan, however, they are designed with fewer hoops to jump through in an intentional move to get funding to small businesses ASAP. It’s also worth mentioning that PPP small business loans offer the option of loan forgiveness. Let me say that again – loan forgiveness.
How Do PPP SBA Loans Work?
The PPP SBA loans are a new category of loans that stand alone from other SBA relief loans and small businesses can get a copy of the loan application through the U.S. Treasury website for Paycheck Protection Program loans. From there, the small business owner must meet up with an approved SBA lending institution to go through the actual application process. There is a possibility that small businesses will be able to apply directly with approved institutions online, but this has not yet been clarified. According to the Washington Post, priority will be given to small businesses and non-profit organizations during the first week of applications and independent contractors and sole proprietors will have to wait at least another week before review.
If approved for a PPP SBA loan, funding will be made available as of Friday, April 3rd and the loan is backed by a federal loan guarantee. These funds can be used to cover payroll, employee benefits, mortgage interest before February 15th, rent, and utilities that were under a lease agreement established before February of 2020. Funds may be used only for costs that were incurred from February 15th through June 30th.
PPP SBA loans cap out at $10 million and there are plenty of qualifiers before your small business can get its hands on any of that money. If your small business is able to secure a PPP loan officials say that the interest rate will begin at 0.5% with an intended cap of 4%.
Repayment of PPP loans will begin six months after the initial loan is made and complete payment should be made after two years.
What About That Loan Forgiveness?
The new loan program incorporates a loan forgiveness clause that begins eight weeks after the loan begins. This clause offers forgiveness for the first eight weeks of the loan for businesses that are able to keep employees in a job or who are able to continue paying their bills throughout the current pandemic. This loan forgiveness is designed to cover the cost of payroll for employees that earn less than $100,000 per year, rent and mortgage payments, and utility costs. For employees making over $100,000 per year, the loan forgiveness will apply only to the $100,000 cap.
Have SBA Loan Forgiveness Questions or Comments?
If you have a question or comment pertaining to the $349 billion dollar aid recently made available to small businesses, leave a comment below!