Follow our SBA 7(a) Paycheck Protection Program Updates here
What do I need to know about this program?
As part of the CARES Act, now signed into law, small businesses and some non-profits will have access to SBA loans with higher loan amounts, no restrictions on use (except if seeking 100% forgiveness), deferred payments for 6 months, all fees being waived and the potential for forgiveness of up to the full principal amount through the 7(a) CARES Paycheck Protection Program
How is this different from a Standard 7(a) Loan?
These loans provide an option for 100% principal forgiveness when specific requirements are met
All payments will be deferred for 6 months. However, interest will continue to accrue over this period.
Loans can be used to cover payroll cost, rent payments or mortgage interest, and utility payments. Rent agreements, mortgage obligations, and utility services start dates must have incurred before February 15th, 2020 to qualify. For more information on payroll costs, see below under “What makes up payroll costs?”
If the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.
Higher Loan Amounts
The SBA has increased maximum loan amounts from the standard $5 Million to $10 Million.
The new loan does not require a personal guarantee or collateral and has no minimum FICO requirements.
How do I Qualify for an SBA 7(a) CARES Paycheck Protection Program Loan?
Where is your business located?
Your business must be based in the U.S.
How long have you been in business?
Your business must have been in operation on February 15, 2020.
You must be able to certify that your business suffered economic hardship due to COVID-19.
What questions have other small business owners been asking?
What are the rates and terms of the 7(a) CARES Paycheck Protection Program Loan?
With this program, rates are set at 1% and terms will go as far out as 2 years for any balance not forgiven.
How does loan forgiveness work with this program?
If all employees are kept on payroll, businesses will be able to apply for forgiveness on any amount spent during the 8 week period post loan closing to cover payroll cost, rent payments or mortgage interest, and utility payments. Any amount spent after the 8 week period will not qualify for forgiveness. It is also anticipated that not more than 25% of the forgiven amount may be used for non-payroll costs.
How do I Qualify for Forgiveness?
A major reason for the proposed Paycheck Protection Program is to help as many business as possible keep as many individuals employed as possible, so qualifying for principal forgiveness is heavily based on staff and pay rate retention, though there are other conditions that also apply:
Funds received through this program must be spent on payroll, debt, and mortgage/rent expenses. It is anticipated that not more than 25% of the forgiven amount may be used for non-payroll costs.
To be eligible for full forgiveness, employee count cannot be reduced (as compared to the previous year)
To receive full forgiveness, you cannot have a reduction in any employee’s pay that goes beyond 25 percent of the prior year’s compensation (reduction in salaries over $100,000 are not considered in this calculation)
Full forgiveness can be achieved if you re-hire employees furloughed or laid off at any point between 2/15/2020 and 4/26/2020, so long as they are rehired by June 30, 2020.
Forgiveness is conditional on your employee count not being reduced over the next year.
If you don’t meet the full employment requirements, you are still eligible for partial loan forgiveness. However, the amount forgiven will be proportionately reduced based on the number of employees you were unable to retain or rehire.
How will the SBA Determine how much I can receive?
Approval amounts will be based on 2.5X your prior average monthly payroll costs over the last year, up to $10 Million.
Payroll costs include:
Compensation via salary, wages, commission and cash tips
PTO and Leave including vacation, parental, family, medial and sick leave
Benefits payment for group health care and insurance premiums
State and local employment taxes
Can I combine the SBA 7(a) CARES Relief Loan with other SBA Loans?
You can combine a 7(a) CARES Relief Loan with an already existing SBA 7(a) Standard or Express Loan, if it was obtained before February 15th, 2020. You can also combine a 7(a) CARES Relief Loan with a 7(b) EIDL Loan
How long will this program run for?
This program will end when it reaches its cap of $349 billion in issued loans, or on June 30th, 2020 if the cap is not reached by then.
What makes up payroll costs?
Payroll costs are comprised of:
Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee)
Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provision of group health care benefits including insurance premiums; and payment of any retirement benefit
Stat and local taxes assessed on compensation
For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee
Do I need to certify anything?
Yes. As part of your application, you will need to certify in good faith that:
Current economic uncertainty makes the loan necessary to support your ongoing operations
The funds will be used to retain workers and maintain payroll or to make mortgage, leases, and utility payments
You have not and will not receive another loan under this program
You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 8 weeks after getting this loan
Loan forgiveness will be provided for the sum of the documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs
All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law
What documents do I need to apply?
Complete Paycheck Protection Program form (Form 2483)
Entity documents: Complete set
Articles of incorporation/Articles of organization
Tax ID number
Operating agreement and/or updated statement of information
Driver license copy (for every individual with 20% or more ownership)