Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on April 2, 2020.
This Gavel to Gavel column is a summary of our full-length Q&A on Small Business Administration (SBA) loan programs.
By Phillips Murrah Director Alison J. Cross and Attorney Kara K. Laster
Phillips Murrah Attorney Kara K. Laster and Director Alison J. Cross
On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security Act, which expanded two Small Business Administration loan programs – the Paycheck Protection Program and the Economic Injury Disaster Loan Program.
Small business owners, in particular, are anxious to receive relief under the historic act. Below is a summary of highlights of these two expanded lending programs:
• PPP loans: Eligible businesses may use PPP loans for payroll costs, health care, interest on mortgage payments, rent, utilities, and interest on any other debt. Eligibility requires that applicants had no more than 500 employees per physical location, were operational prior to Feb. 15, had employees on payroll, and paid wages and payroll taxes. They may receive the lesser of 2.5 times the average monthly payroll costs during the prior year or $10 million.
The dates to begin applying are small businesses and sole proprietorships on April 3 and independent contractors and self-employed individuals on April 10. The application deadline is June 30, but businesses should apply as soon as possible because there is a funding cap.
Businesses need to submit a PPP loan application along with payroll documentation to an approved lender. Businesses must certify that they suffered substantial economic injury from COVID-19 and that funds will be used to retain workers and maintain payroll, or make mortgage payments, lease payments, and utility payments.
• EIDL loans: Eligible businesses may use EIDL loans for working capital and they can be up to $2 million with interest rates of 3.75% for small businesses and 2.75% for nonprofits. Loan amounts are based on actual economic injury. Eligibility requires that applicants had no more than 500 employees in existence as of Jan. 31 and that they suffered substantial economic injury from COVID-19.
Additionally, if the loan is made before Dec. 31 and is $200,000 or less, there is no guarantee requirement. Applications should be submitted directly to the SBA, which can be found on its website.
There are numerous additional stipulations and details related to these two small business disaster loans that cannot fit onto this column format, including loan forgiveness criteria, amount determination and approved lenders. Applicants should consider discussing their application with legal representation.
Phillips Murrah attorneys Kara K. Laster and Alison J. Cross contributed to this column.