South Central Power

Coronavirus Business Loans: What You Need to Know

April 21, 2020

Coronavirus Business Loans: What You Need to Know

The coronavirus outbreak has created a dire economic situation as businesses across the country have been forced to close or reduce their operations, while others have seen a significant drop in revenue. The federal government has responded with the Coronavirus Aid, Relief, and Economic Security Act (CARES). The legislation includes three important provisions that can help your business and employees.

Payroll protection loans

The Paycheck Protection Program (PPP) is an extension of the U.S. Small Business Administration’s 7(a) loan program. There is the possibility of 100% loan forgiveness if your business doesn’t reduce employee headcount or wages by more than 25% during the eight-week period after receiving the loan.

Loan forgiveness includes funds going to payroll, as well as mortgage interest payments, rent, utilities and any other debts the organization has incurred after February 15, 2020. Businesses must file for loan forgiveness at the end of the initial eight-week period. The program is set to end as of June 30, 2020.

Who’s eligible for the program?

  • Businesses with fewer than 500 employees
  • Self-employed, independent contractors and sole proprietors
  • Charitable organizations and other nonprofits

Businesses must certify that the uncertainty of current economic conditions makes the request for a loan to support ongoing operations necessary.

Payroll costs include:

  • Salary and wages or similar compensation
  • Vacation, parental, family, medical or sick leave
  • Group healthcare benefits including insurance premiums
  • Retirement benefits
  • State and local income tax

The maximum loan amount under the program is $10 million, or the sum of 2.5 times a company’s monthly payroll cost in 2019. You can apply for a loan through any SBA lender. Consult with your local financial institution to determine if they are participating in the program.

Economic disaster loans

Economic Injury Disaster Loan (EIDL) program provides loans of up to $2 million to help you meet necessary financial obligations that your business could have met had the pandemic not occurred. It provides relief from economic injury caused directly by the disaster. You can apply directly to the SBA for this loan.

There is a new, streamlined process that allows you to check your eligibility for a $10,000 advance on the loan. You can find the application here. You must complete this application to be eligible for the advance even you have already completed the long-form loan application.

Expanded unemployment insurance

CARES expands unemployment insurance benefits to include the self-employed and independent contractors, such as gig economy workers.

Also, under this expansion, individuals who ordinarily would qualify for unemployment benefits will receive a flat-fee amount of $600 per week in addition to the regular amount of compensation available in their state. CARES also provides an additional 13 weeks of unemployment insurance to what is available under state law. Contact your state’s unemployment benefits office for more information.