COVID-19 Impacting Your Business?
The SBA has announced that small business and sole proprietorships can apply for loans starting April 3, 2020. Further, starting on April 10, 2020, independent contractors and self-employed individuals can apply. Although the program will be available through June 30, 2020, funds are limited, so the sooner a business applies, the better. Small businesses includes nonprofits, 501(c)(19) veterans organizations, tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees which are affected by COVID-19. The exception is larger businesses in certain industries which meet SBA employee-based size standards. (The hyperlinks herein will provide more information about the specific topic.)
The SBA has published the following information about loan details and forgiveness:
“The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of .5%.”
In determining how much can be borrowed, combine the following categories into a monthly average and multiply by 2.5. The amount cannot exceed $10 million.
- Salary, wages, commissions, and tips (capped at $100,000 yearly for each employee)
- Employee benefits (vacation, parent, medical leave, payments for group health care benefits and payments for retirement benefits)
- State and local taxes
- For sole proprietors/independent contractors: wages, commission, income, or net earnings from self-employment (capped at $100,000 yearly for each employee)
In addition to Paycheck Protection Program loans, there are other forms of assistance currently available through the SBA. Small businesses suffering substantial economic injury due to COVID-19 can apply for low-interest federal disaster loans. The SBA also has a debt relief program for small businesses who are affected by the current COVID-19 health crisis.
Legal help is available to help you navigate the myriad of options available during this time. Contact Davis Miles McGuire Gardner for all of your legal needs. Please call us if you have challenges related to your business.
(The information provided in this article is provided for informational purposes only. Davis Miles McGuire Gardner, PLLC is not a lender. For more information about these programs, please contact your lender. If you do not have a relationship with a lender, Davis Miles McGuire Gardner, PLLC is happy to introduce you to several lenders who may or may not be a good fit for you. We do not warrant or represent that you or your business may qualify for the above programs.)