SBA Paycheck Protection Program

Information and developments are flying fast these days. With the recent passing of the Coronavirus Aid, Relief, and Economic Security Act (CARES), another SBA program has been made available for businesses to gain much needed access to working capital.

The Paycheck Protection Program, part of the CARES Act, provides a path for businesses, through a participating SBA Lender/Bank, to be able to apply for funds as defined in the program.  The loan window will open up on Friday, April 3, 2020.  It is advised to wait until your bank sends the application as those applications may be adjusted right through the last minute.  The basic elements of the program are:

·        Must have 500 or fewer employees (beware of aggregation rules)

·        Maximum Loan will be $10 million

·        The loan can be forgiven if used for:

o   Payroll costs

o   Rent

o   Utilities

o   Mortgage/Existing Debt as defined

o   Other designated costs

o   Due to high subscription expectation, not more than 25% of loan forgiveness can be for non-payroll costs

·        Provisions for employee retention as defined.  Caps re: highly compensated employees

·        Debt forgiven will NOT be included as taxable income for federal tax purposes

The links below are official US Department of Treasury links (they are safe).

Department of the Treasury Press Release on the Paycheck Protection Program

Paycheck Protection Program - Borrowers Info Sheet

Paycheck Protection Program - Lenders Info Sheet

SBA Disaster Relief Loans

At the end of January, when I wrote about the possibility of a recession, I obviously had no idea anything like this would happen.  It turns out those graphs were solid evidence we weren’t far away from whatever factor may become the trigger for difficult times in the near future.

So here we are, dealing with a completely new set of circumstances.  The main objective for businesses right now is to make it to the other side of this.  It will hit different industries in different magnitudes and at different times, but all will be hit to some extent.

The government is rolling out new assistance programs as the days roll on, the one I wanted to get out to everyone now is the U.S. Small Business Administration (SBA) is offering low-interest disaster loans up to $2,000,000 for affected businesses.  The application process is online and can be found by clicking this hyperlink.

I strongly encourage business owners to immediately draw down on their lines of credit now to ensure liquidity for at least the next three months (maybe draw all available capacity).  I also suggest for those feeling they may need additional working capital sometime in the next three to six months or so, to apply for this SBA loan program and get in line.

The name of the game right now is to preserve capital and make it past this event.  Consider talking with your business partners, vendors, landlords, etc. as to how they can help your business if you feel your business will be significantly adversely affected.

This too shall pass.  It will pass better for those who execute well and make good decisions now to mitigate the impact.

Some more info...

SBA Disaster Loan Fact Sheet

SBA 3 Step Guide