Guide to Small Business COVID-19 Emergency Loans

 
06/21/2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses. 

Importantly, these PPP loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

The administration’s PPP program guidelines can be found at www.treasury.gov, and the U.S. Small Business Administration's search tool to find a bank that offers PPP loans can be found at https://www.sba.gov/paycheckprotection/find.

The U.S. Chamber of Commerce has issued this step-by-step guide to help small businesses and self-employed individuals check eligibility and prepare to apply for a loan. Here’s what you need to know.
 

Here are the questions you may be asking—and what you need to know.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating.

While the program is open until June 30, 2020, the government is advising borrowers to apply as soon as possible given the loan cap on the program.

1. Am I eligible?

You are eligible to apply for a PPP loan if you are:

  • A small business with 500 or fewer employees
  • Defined as “small” by SBA Size Standard that allows for higher employee threshold or is revenue based; or
  • A small business with maximum tangible net worth up to $15 million and the average net income for full 2 fiscal years prior to application does not exceed $5 million
  • A 501(c)(3) with 500 or fewer employees
  • A  sole proprietor, independent contractor, or self-employed
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard

In addition, some special rules may make you eligible:

  • If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply
  • Small businesses that have minority shareholders (private equity or venture capital) can still qualify if those stakeholders relinquish rights

 

2. What will lenders be looking for?

Borrowers will need to complete the Treasury Department's PPP Loan Application (PDF) and payroll documentation.

Lenders will also ask you for a good faith certification that:

  1. The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
  2. The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
  3. Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
  4. From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold SBA Disaster Loans into a PPP loan)

If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.

Visit link for the full article: https://www.uschamber.com/report/guide-small-business-covid-19-emergency-loans

 



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