We have some more guidance on the SBA loans since President Trump signed it into law last night. You can apply for a low interest economic injury loan for up to $2,000,000 on sba.gov.
However, what was passed yesterday is a different type of loan that is aimed at small businesses and seeing that they keep people employed so that when the bans are lifted, businesses are ready to open and get back to work. Here are some key points; there will be more guidance coming as this is a large bill with a lot to decipher. This is not all inclusive and, as we all know with the government, subject to changes.
- You can apply for this payroll loan through an approved 7(a) SBA lender. The government is working to get more banks qualified and hopefully by next Friday more banks will be able to process these loan requests.
- This payroll loan can be converted to a grant (the loan will be forgiven) if you apply correctly and follow the rules.
- You have to make a good faith statement that Covid 19 affected your business.
- The payroll loan you can apply for will be the lesser of 10 million or the sum of 2.5 times the average total monthly payroll costs for the prior year.
- You must have been in business on 2/15/20 and employee less than 500 people.
- The portion of the loan that can be eligible for forgiveness will include 8 weeks of payments for employee wages, utilities, rent and interest expenses on mortgage obligations or other debt obligations incurred before 2/15/20 for your business. If you get the loan and you don’t spend all of the money you received on these eligible expenses you will have to repay that portion of the loan.
- You must keep your employees to qualify for loan forgiveness. If you get the loan and then lay everyone off you will have to pay the loan back over 10 years with up to 4% interest rate.
- If you have already laid people off and don’t have payroll, one of the purposes of this package is to get you to bring those employees back to work and start paying them again.
- Record keeping will be extremely important because you will have to verify your expenses in order to qualify for loan forgiveness. It will be imperative that you make files that verify the expenses for payroll, utilities, rent and interest expenses incurred. At this time we don’t know exactly what they will require but I would keep invoices, copies of checks, bank statements with the costs highlighted (make sure you are getting images of checks with your bank statements), etc.
Again, there will be more guidance coming in the next week and we will do our best to keep you informed.
