COVID-19 Business Resources Update – PPP & EIDL Funds Still Available!
Federal funding is still available for businesses impacted by the COVID-19 pandemic, but you need to act quickly! If your business is in need of additional funding or having trouble finding funding, see below. And, as always, you can reach out to San Leandro Economic Development staff at firstname.lastname@example.org or sign up for a free advisor with the Alameda County Small Business Development Center to walk you through the application process.
Economic Injury Disaster Loan – open for new applications
SBA has reopened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program portal to all eligible applicants experiencing economic impacts due to COVID-19.
Now that the program is accepting new applications, additional small businesses and non-profits will be able to receive long-term, low interest loans and emergency grants – reducing the economic impacts of COVID-19 on their businesses, employees and the communities they support.
- EIDL assistance can be used to cover payroll and inventory, pay debt or other expenses.
- Additionally, the EIDL Advance can provide up to $10,000 ($1,000 per employee) in emergency funds to businesses that do not have to be repaid. Small businesses may receive an advance, even if they are not approved for a loan.
- EIDL loan and Advance applications already submitted are being processed on a first-come, first-served basis. Small businesses that have already applied do not need to apply again. For information or to apply, please visit the SBA disaster assistance website at SBA.gov/Disaster.
- To keep payments affordable for small businesses, SBA offers loans with long repayment terms, up to a maximum of 30 years. Plus, the first payment is deferred for one year.
- These loans may be used to pay debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
Funding from the second round of the SBA’s Paycheck Protection Program (PPP) is still available and businesses are encouraged to apply for the loan before the deadline of June 30, 2020. Applications are through participating local banks, or one of the various online lenders. If you are a Square, PayPal, or Intuit customer, you can apply for a loan through them, as well as other lenders such as Bluevine or Kabbage. You may also reach out to the Alameda County Small Business Development Center for assistance in applying for the program.
The SBA’s Paycheck Protection Program offers loans of up to $10 million in partnership with select banks. Small businesses, certain nonprofits, faith based organization, sole proprietors, independent contractors and self-employed persons may apply. This is a forgivable loan to keep employees on payroll and maintain salary levels. To be forgiven, the majority of the loan must be used for payroll, including the cost of employer-provided health benefits. If you’ve already laid off your employees, this loan provides the opportunity to hire them back. See more details regarding updates to how/when the money may be spent below.
New Provisions of the Paycheck Protection Program
- The loan may only be used to pay payroll, business rent/mortgage interest, or utilities – nothing else. You have 24 weeks to use the loan funds – also known as the “covered period.”
- After the 24 weeks you apply to your lender for loan forgiveness. If you can show that at least 60% of the loan was indeed used for payroll and not more than 40% was used for other authorized purposes, the loan is forgiven by the lender.
Rules for Loan Forgiveness
- It could be mandatory to use at least 60% of the loan for payroll in order to get any loan forgiveness at all. For instance, using more than 40% of the loan to pay for rent, mortgage interest and/or utilities may now disqualify you from getting any loan forgiveness.
- Loan forgiveness is proportionally reduced if you don’t rehire to the same number of full-time employees you had before the COVID-19 disruption by December 31. However, if you can show a good faith effort to rehire but was unable to find workers willing to work, or if you can show that your business is unable to return to its previous level of business activity due to COVID-19 health and safety restrictions, you will be exempted from this proportional reduction in loan forgiveness.
- Loan forgiveness is also proportionally reduced if you cut the wages of any workers to less than 75% of their original wage rate and you haven’t restored each of their wages to at least the 75% level by December 31.
- Loan forgiveness is also reduced by the amount of any SBA Economic Injury Disaster Loan (EIDL) “Advance” payment your business received as COVID-19 relief. Considered a grant, only the EIDL Advance counts against PPP loan forgiveness, not the EIDL Loan.
- If any part of your loan is not forgiven, the unforgiven balance must be repaid at 1% interest over a 5-year term, with the first payment deferred until after the end of the 24-week covered period plus the time it takes for the lender to be refunded by the SBA for the loan forgiveness amount (estimated 6-10 months). If you neglect to seek loan forgiveness, your first payment will be due 10 months after the end of your covered period.
If your business has already received a PPP loan, you cannot apply for a second loan. Existing PPP borrowers have been operating under the old rules and many are approaching or even at the end of their 8-week “covered period” and have already used some or all of their PPP funds within the parameters of the prior PPP program. If you wish to remain under the original, 8-week “covered period” for using your loan funds, you may do so.
Existing PPP borrowers are also already obligated under a PPP promissory note with a 2-year term, and that note is a contract unchanged by this bill. The bill does mention that an existing PPP loan may be modified to one with a 5-year term, if the borrower and the lender mutually agree.
All of the PPP rules are published here: https://home.treasury/gov/policy-issues/cares/assistance-for-small-businesses
Main Street Lending Program
The Federal Reserve has established the Main Street Lending Program (Program) to support lending to small and medium-sized businesses that may not be eligible for other federal funding programs. The $600 billion initiative, is intended to fill the gap between the Paycheck Protection Program (PPP), which provides forgivable loans to small businesses, and alternative funding sources, such as corporate bond markets, available to large companies.
Firms with fewer than 15,000 employees or less than $5 billion in revenue are eligible for a Main Street Loan. A bank makes the loan and then sells 95% of it to the Federal Reserve (Fed), reducing its risk during a highly uncertain crisis and removing the loan from its books so it can lend to other companies. The Fed recently lowered the minimum loan amount to $250,000 and raised the maximum to $300 million to open the program to more firms. To reduce monthly payments, loan terms were extended from four to five years and principal payments now can be deferred for two years, up from a year.
To be eligible, a business must:
- Have been established before March 13, 2020.
- Must have 15,000 employees or fewer or have had an annual revenue in 2019 of less than $5 billion.
- Must not be a type of business ineligible to receive Paycheck Protection Plan (PPP) funds, except with regards to number of employees.
- Be a US businesses, created or organized in the United States (including US subsidiaries of international companies)
- Have not participated in the Primary Market Corporate Credit Facility (PMCCF).
- Not have received specific support under Title IV of the CARES Act, which consists of support to certain aviation-related businesses and businesses critical to maintaining national security.
Businesses that receive loans under the Paycheck Protection Plan (PPP) may also be eligible for the Main Street Lending Program, subject to terms.
The Program will operate through three facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF).
Term sheets for each facility and frequently asked questions (FAQs) (PDF) providing more information regarding eligibility and conditions can be found at https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm