Small businesses are now eligible to apply for loans to help sustain their businesses during the COVID-19 pandemic.
The CARES Act, which was signed into law March 27, 2020, by President Donald Trump, establishes a $349 billion Paycheck Protection Program to provide relief to millions of small businesses. The new loan program helps small businesses with their payroll and other business operating expenses. It provides capital to businesses without collateral requirements, personal guarantees, or Small Business Administration (SBA) fees. All loan payments will be deferred for 6 months. In addition, the SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll costs, rent, utilities and mortgage interest.
“This legislation provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed,” says Steven Mnuchin, secretary of the United States Treasury. “Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day. The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”
The new loan program will help small businesses with their payroll and other business operating expenses. It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees – all with a 100% guarantee from SBA. All loan payments will be deferred for six months. Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest.
The Paycheck Protection Program is specifically designed to help small businesses keep their workforce employed. The new loan program will be available retroactive from Feb. 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020.
Loan Terms and Conditions
All small businesses are eligible, including nonprofits, veterans organizations, tribal concerns, sole proprietorships, self-employed individuals and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries.
- Maximum loan amount up to $10 million
- Loan forgiveness if proceeds used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)
- All loans under this program will have the following identical features:
- Interest rate of 1%
- Maturity of 2 years
- First payment deferred for six months
- 100% guarantee by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
Visit SBA.gov/Coronavirus for more information on the Paycheck Protection Program.