How to get an emergency SBA loan from the Paycheck Protection Program

In this 3-minute read:

  • How much money can I get from the Paycheck Protection Program provision of the CARES Act?
  • Do I have to pay the government back?
  • What are the payback terms and interest rate for emergency SBA loans?
  • How do I know if my business qualifies?
  • Other sources of emergency business funding

The CARES Act, a $2 trillion federal stimulus package, was passed by congress on March 27, 2020. Among other things, the bill allocates $350 billion to American small businesses that are reeling from shutdowns imposed to slow the spread of the novel coronavirus (COVID-19) via a provision called the Paycheck Protection Program.

On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, reducing the minimum loan funding that must be spent on payroll to 60%, and easing the requirements for maintaining staffing and compensation levels. Please read the details here.

On April 23, 2020, the second round of funding for the PPP and EIDL programs was passed by congress and signed by President Trump, including an additional $310 billion to the PPP program, $10 billion for EIDL advances or “grants,” and roughly $60 for other disaster loans under the program.

These bills are a critical measure to keep falling small businesses alive. We surveyed 2,300 small business owners and found that 1 in 5 would shut down forever within 30 days if sales stopped entirely, and more than half of all local businesses would die within 90 days. Many businesses are facing exactly that reality. 

This urgency is reflected in the size of the appropriation for small businesses, which still may not be enough. From Bloomberg

Providing fast relief to small-business owners and helping them keep their workers on payroll is central to shore up the economy. It’s a crucial sector that employs almost half of the private workforce and has been among the hardest hit by lockdowns across the country as part of efforts to slow the coronavirus pandemic. The number of Americans filing for unemployment benefits surged to a record 3.28 million [the third week of March 2020], more than quadruple the previous high in 1982, according to Labor Department figures released [on March 26, 2020].

So, what can desperate small business owners expect from the $350 billion Paycheck Protection Program stimulus bill? And how can you see if you qualify? Here’s a full overview. 

What is the Paycheck Protection Program? (Overview.)

The Paycheck Protection Program authorizes $349 billion (in the first round of funding; $310 billion has been added for round 2) in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.

The loan amounts will be forgiven as long as:

  • The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 (or 24) week period after the loan is made; and
  • Employee and compensation levels are maintained.

Payroll costs are capped at $100,000 on an annualized basis for each employee. Not more than 40% (previously 25%) of the forgiven amount may be for non-payroll costs.

Loan payments will be deferred until borrowers receive notification from the SBA of their PPP loan forgiveness approval, or 10 months after the last day of the covered period (previously payments were deferred for 6 months).

How much money does the $2 trillion CARES Act allocate to small businesses?

About $350 billion via the Paycheck Protection Program was loaned out during the first round of PPP funding, and an additional $310 billion in the second round. We predict there will be at least one more round of funding. 

How will small businesses get access to federal stimulus money from the Paycheck Protection Program?

  • Through loans and grants funded by Congress and administered by the U.S. Small Business Administration.
  • The SBA has approved a network of hundreds of lending institutions to make these loans directly.
  • Private companies, like Womply, are facilitating direct connections to SBA-approved lenders to expedite the process for small businesses that need funds ASAP. 

How do I know if my small business qualifies for a loan or grant under the Paycheck Protection Program?

All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply for PPP loans. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries (more details here).

For the PPP program, the SBA’s affiliation standards are waived if your business:

  • Is in the hotel and food services industries (click here for NAICS code 72 to confirm)
  • Is a franchise in the SBA’s Franchise Directory (click here to check)
  • Receives financial assistance from small business investment companies licensed by the SBA. (The SBA may release additional guidance on this point.)

Some businesses may be disqualified due to rare circumstances, such as companies that are majority owned by private venture capital investors. 

How much stimulus money can my business get through the Paycheck Protection Program?

  • Loans can be for up to two months of your business’s average monthly payroll costs from the last year plus an additional 25% of that amount, capped at $10 million.
  • If you are a seasonal or new business, you will use different applicable time periods for your calculation (check with your SBA-approved lender for details).
  • Please note that payroll costs will be capped at $100,000 annualized for each employee.

What interest rate will I get on an emergency loan through the Paycheck Protection Program?

All loans will have a 1% interest rate (the government modified this from 0.5% on 4/3/2020), with deferred until borrowers receive notification from the SBA of their PPP loan forgiveness approval, or 10 months after the last day of the covered period (previously payments were deferred for 6 months).

Do I have to pay the money back to the government?

It’s possible to have some or all of your PPP loan forgiven. You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 (or 24) weeks after getting the loan. 60% (previously 75%) of the funds must be spent on payroll to achieve full loan forgiveness.

You will also owe money if you do not maintain your staff and payroll.

  • Number of staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-hiring: You now have until December 31, 2020 (previously June 30, 2020) to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

When can I apply for an emergency loan?

  • Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
  • Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

The program will continue through June 30, 2020 while funds last, but we strongly recommend applying ASAP due to high demand and loan processing time.

What if I already have an SBA loan?

You can still get a forgivable emergency loan from the PPP initiative. 

Do I have to offer collateral or personal guarantees to get an emergency loan?

  • No, you don’t have to provide collateral or personal guarantees for PPP loans. These funds are being offered on good faith due to the COVID-19 crisis.
  • However, the government will prosecute anyone who uses a PPP loan for fraudulent purposes.

How do I apply for a small business stimulus loan if my business has been impacted by COVID-19?

You need to find an SBA-approved lender who is still accepting applications. The revised deadline is August 8, 2020.



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