The new, $2 Trillion Act to provide assistance is called CARES – and has now passed the House and Senate. By the time you read this, the President will probably have signed it and it will be law. There are many relief provisions in the Act, but I want to alert business owners right now to the Business Loan Programs. These programs provide major relief, with several provision including forgiveness of the debt and no personal guarantees required. The programs will be administered by banks – rather than through the SBA – under Section 7 of the SBA. This is good news. The act is designed to streamline and expedite the process. Before giving you details, you should do the following: Call your banker now and ask him or her that they put you at the front of the line so that you can apply as soon as the bank’s have the information and programs set up. This will unfold over the next two weeks and the banks are going to be slammed. You need to try and be high on the list! In the meantime, you need to bring your financial information current on the business. If you don’t have a current balance sheet and profit and loss, call your accountant or in house team and work on it. Make sure you have a copy of your last two year tax returns handy in a PDF format to send to the bank when ready.
There are three programs – The “PPP” which stands for Paycheck Protection Program – this program includes forgivable loans to businesses with less than 500 employees (the cap does not apply to hospitality and restaurant industry). Loan amounts are tied to the business’s payroll costs and the funds may be used to cover, payroll, insurance, required mortgage and utility payments and rent. Details on forgiveness are not clear to me yet, but it appears that forgiveness may cover the 8 week period from the loan date for which the funds are used on the above items.
There is also a SBA Express Loan – Repayable Loan program, which permits loans up to $1 million through December 31, 2020. These loans are supposed to have a very fast approval process. Interest cannot exceed the SBA maximum. The third program is the “EIDL” – which is the Emergency Economic Injury Disaster Loan. This is also a repayable loan, available to employers with less than 500 employees and sole proprietors and independent contractors are eligible. Under CARES, the SBA is to waive any personal guarantees on advances and loans under $200,000 as long as the applicant has been in business for 1 year prior to the disaster.
I’m impressed with what I see so far. The devil is always in the details and the ability of the government to act fast. Hopefully – this can be achieved. As we learn more details I will pass them along – but for now – pick up the phone and call your banker!
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