April 21, 2020

Covid-19 Relief Available to Small Businesses and Non-Profits

The US Capitol Building, seen from the west

The Small Business Administration (SBA) is providing relief to impacted small businesses and non-profits via the Paycheck Protection Program (PPP), the Economic Injury Disaster Loans (EIDL) program, and the SBA Express Bridge Loan Pilot Program. Furthermore, the SBA has been authorized to engage in substantial debt relief by automatically paying the principal, interest, and fees of qualifying loans for a period of six months, and will do the same for all qualifying loans issued prior to September 27, 2020.

Congress has funded these programs in two pieces of legislation, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), H.R.748, and the subsequent Paycheck Protection Program and Health Care Enhancement Act, H.R.266. These bills have authorized a total of $659 billion in funding for the Paycheck Protection Program and more than $70 billion for the Economic Injury Disaster Loans (EIDL) program, including $20 billion for Economic Injury Disaster Grants. 

Paycheck Protection Program

Forgivable loans are available through the PPP to any small businesses and 501(c)(3) non-profits with fewer than 500 employees. The forgivable funds can be used for payroll costs, interest on mortgages, rent, and utility payments, although SBA guidelines recommend that at least 75% of the forgiven amount be used on payroll due to high demand for this loan program. Furthermore, these funds must be used for operating expenses in the eight weeks following the loan’s origination in order to be eligible for forgiveness.

Loan payments will be deferred for six months, and as the goal of the program is to continue small business employment, forgiveness will be reduced if the organization’s full-time headcount or salary and wages decrease. Any amount not forgiven will be repaid over a 2-year maturity period at 1% APR. Loan applications will be processed through any existing SBA 7(a) lender as well as participating federally insured deposit corporations, federally insured credit unions, and Farm Credit System institutions. PPP program funds are available until June 30th, 2020, although they are not anticipated to last that long.

Economic Injury Disaster Loans

Small businesses and non-profits are also eligible for the Economic Injury Disaster Loan (EIDL) program, a low interest loan of up to $2 million dollars. These loans will be repaid after a 6-month forgiveness period, at a rate of 3.75% interest for small businesses and 2.75% interest for non-profits.

Businesses may apply for both the PPP and EIDL programs, but they are not allowed to use the funds for the same purpose or duplicative amounts, preventing double dipping. When applying for an EID Loan, organizations may request an emergency advance loan of up to $10,000. This money does not have to be repaid and is intended to reach small businesses and non-profits within three days of them filing their EIDL application. 

SBA Express Bridge Loans

For organizations that need more than $10,000 to cover short-term costs while they wait for their EIDL application to be approved, the SBA has made available funds from the Express Bridge Loan Pilot Program. Through this program, small businesses with an existing relationship with an SBA Express Lender can receive an additional $25,000 in the form of a bridging loan. This loan will be repaid out of the funds made available when their EIDL application is approved. In addition, the CARES Act increased the maximum SBA Express Loan amount from $350,000 to $1 million through December 31, 2020.

SBA Debt Relief 

Finally, the SBA is working to help small businesses through the current crisis with a six month period of debt relief on all current 7(a) loans, 504 loans, and microloans, as well as debt relief on any loans issued prior to September 27, 2020. The SBA will provide this debt relief by automatically paying the principal, interest, and fees of qualifying SBA loans. 

Together, the funds and debt relief available to small businesses and non-profits can help keep critical enterprises afloat until economic circumstances improve. 

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