SBA’s Economic Injury Disaster Loans for Small Businesses

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Presented by Mohawk Valley Small Business Development Center

March 31, 2020

Thank You to Our Co-Sponsor

AgendaPart 1 -- Overview of SBA Economic Injury Disaster Loan Program• Eligible Businesses• Loan Criteria• Required Documentation and Application Process

Part 2 -- Overview of Paycheck Protection Program (PPP)• Eligible Businesses• Eligible Expenses• Loan Criteria and Application Process

Part 3 -- Your Feedback and Questions

SBA’s Disaster Declaration Makes Loans Available Due to the

Coronavirus (COVID-19)

The U.S. Small Business Administration (SBA) is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19),

EIDL: What Businesses Are Eligibleto Apply?

SBA’s Economic Injury Disaster Loans (or working capital loans) are available to small businesses, small agricultural cooperatives, small aquaculture businesses and non-profit organizations.

This includes:•Businesses directly affected by the disaster•Businesses that offer services directly related to the businesses in the declaration•Other businesses indirectly related to industries that are likely to be harmed by losses in their community(Example: Manufacturer of widgets may be eligible as well as the wholesaler and retailer of the product.)

EIDL: What Businesses Are Eligibleto Apply?

• Small business concerns (including sole proprietorships, with or without employees)

• Independent contractors

• Cooperatives and employee-owned businesses

• All non-profits including faith-based organizations

• Tribal small businesses

SBA Size Standard Links

Look up your NAICS code: https://www.census.gov/eos/www/naics/

Look up the size standard for that code:SBA Size Standards Look-up Tool: https://www.sba.gov/size-standards/

SBA Size Standard and Affiliation Guide: https://bit.ly/SBASize

EIDL: Ineligible Businesses

• Agricultural Enterprises: If the primary activity of the business(including its affiliates) is as defined in Section 18(b)(1) of theSmall Business Act, neither the business nor its affiliates areeligible for EIDL assistance.

• Religious Organizations

• Charitable Organizations

• Gambling Concerns (Ex: Concerns that derive more that 1/3 oftheir annual gross revenue from legal gambling activities)

• Casinos & Racetracks (Ex: Businesses whose purpose for beingis gambling

EIDL: What Is the Criteriafor a Loan Approval?

Credit History-Applicants must have a credit history acceptable to SBA.

Repayment –SBA must determine that the applicant business has the ability to repay the SBA loan.

Eligibility- The applicant business must be physically located in a declared county and suffered working capital losses due to the declared disaster, not due to a downturn in the economy or other reasons.

EIDL: How Much Can You Borrow andWhat Are the Interest Rates?

• Eligible entities may qualify for loans up to $2 million.

• For this disaster, the interest rates are:3.75 percent for small businesses and2.75 percent for nonprofit organizations with terms up to 30 years.

EIDL: How Can You Use the Loan Funds?

These working capital loans may be used topay fixed debts, payroll, accounts payable, andother bills that could have been paid had thedisaster not occurred.

The loans are not intended to replace lost salesor profits or for expansion.

Payments deferred for 4 months (Possiblylonger.)

EIDL: What Are the Collateral Requirements? (NEW!)

• Economic Injury Disaster Loans smaller than $200,000 can be approved without a personal guarantee.

EIDL: Additional Loan Information

Funds come directly from the U.S. Treasury.

Applicants do not go through a bank to apply. Insteadapply directly to SBA’s EIDL Program at:https://covid19relief.sba.gov/#/ (Now live 3/30/20!)

There is no cost to apply.

Applicants can have an existing SBA Disaster Loanand still qualify for an EIDL for this disaster, but theloans cannot be consolidated.

EIDL -- NEW!!!Emergency Economic Injury Grant

Grants to provide you with an emergency advance of up to $10,000 for small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA EIDL:

• To access the advance, you must first apply for an EIDL and then request the advance.

• The advance does not need to be repaid under any circumstances, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.

The deadline to submit Emergency EIDL applications is December 21, 2020. The Emergency EIDL grants will end on December 30, 2020.

Need Assistance?

Free and confidential assistance is available from any SBDC.

Contact the Mohawk Valley SBDC: https://thincubator.co/intake/

Contact an SBDC near you: http://www.nysbdc.org/appointment.html

Additional Resources The NY SBDC Statewide Website: http://www.nyssbdc.org/

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SBA’s Customer Service Center

• 800-659-2955

• (800-877-8339 for the deaf and hard-of-hearing)

• disastercustomerservice@sba.gov

Part 2

Overview of Paycheck Protection Program

(PPP)

Paycheck Protection Program (PPP)A part of the CARES Act

(Coronavirus Aid, Relief, and Economic Security Act)

The CARES Act, approved on March 27, 2020, provides $349 billion of loan funds to support small businesses and other eligible entities impacted by COVID-19 to pay workers, interest on mortgage obligations, rent, insurance, paid sick or medical leave, utilities, and payroll related costs.

PPP: What Businesses Are Eligibleto Apply?

• Small businesses with 500 employees or less; or if the size standard for your business is higher than 500 employees

• Sole-proprietors, independent contractors, and other self-employed individuals

• 501(c)(3) nonprofits, including religious organizations;• 501(c)(19) veterans organizations;

• Tribal business concerns described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees; or

PPP: What Businesses Are Eligibleto Apply?

• Businesses in the hospitality and restaurant industries with less than 500 employees with a NAICS code that begins with “72”.

• Franchises that are approved on the SBA’s Franchise Directory and have less than 500 employees; or

• Small business that receives financing through the Small Business Investment Company (SBIC) program.

PPP: Eligible Expenses

• Payroll support such as employee salaries and paid sick or medical leave

• Insurance premiums

• Mortgage, rent and utility payments

PPP: How Much Can You Borrow andWhat Are the Interest Rates?

• Eligible entities may qualify for loans up to $10 million.

• The maximum interest rate is 4%

• There are no borrower or lender fees

• You can apply for PPP if you have credit elsewhere

• There are no prepayment fees or penalty

PPP: How to Apply

• Applicants are eligible to apply for the PPP loan until 6/30/20

• Apply through an authorized bank and non-bank lenders approved by the SBA and US Department Treasury

• The lender approves your loan application

• Lenders are waiting for guidance from the SBA on when to start accepting applications

PPP: Payments

• Loan payments will be deferred for 6 months

• The lender can elect to defer for an additional 6 months

PPP: What Are the Collateral Requirements?

• There is no collateral or personal guarantee requirement

• SBA 100% loan guarantee through December 31, 2020

PPP: Loan Forgiveness

• The Act establishes that the PPP borrower is eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date of the PPP loan.

• The borrower will be required to provide appropriate documentation to the lender.

• Borrowers can choose which 8-week period they want to count towards the covered period.

PPP: Loan Forgiveness

Expenses eligible for forgiveness:• Payroll costs (except compensation above $100,000 in wages)

• Mortgage payments on a mortgage incurred prior to February 15, 2020

• Interest payment on mortgage incurred prior to February 15, 2020

• Payment of rent or a lease prior to February 15, 2020

• Payment on any utility for which service began before February 15, 2020

PPP: Loan Forgiveness

• If you keep all of your employees, the entirety of the loan will be forgiven.

• To encourage employers to rehire any employees who have already been laid off due to COVID-19, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.

• The maximum amount that can be forgiven may not exceed the principal amount of the loan

PPP: Loan Forgiveness• The loan is forgiven at the end of the 8-week period.

• The borrower must make a request to the lender for forgiveness by providing documentation of payments made under the covered period

• The lender has 60 days to review and approve the request for forgiveness

• Anything not forgiven or repaid by December 31, 2020 will convert to a maximum 10-year loan at a maximum 4% interest rate per annum.

• The loan will remain 100% guaranteed by SBA

Do You Have An Existing SBA Loan?

The CARES Act provides for a six-month loan payment subsidy by SBA on behalf of eligible borrowers on certain existing SBA loans made prior to March 27, 2020.

What SBA loans qualify:• Existing 7(a) including Community Advantage• 504• Microloan

What is the subsidy?• SBA will pay the principal, interest and any associated fees

that are owed on the loan for a six-month period starting on the next payment due.

Any Questions?