COVID-19

What is Cares Act 2020?

On March 27, 2020, the president signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).1 The $2 trillion aid package will provide financial aid to families and businesses impacted by the COVID-19 coronavirus pandemic.

Highlights of the CARES Act

  • $290 billion in direct payments to eligible taxpayers
  • $260 billion in expanded unemployment insurance
  • $150 billion for state and local governments
  • $510 billion in expanded lending for businesses and local governments
  • $377 billion in new loans and grants for small businesses
  • $127 billion for hospitals for ventilators and other equipment

What is an SBA Loan?

SBA loans are business loans guaranteed by the Small Business Administration. With their multiple SBA funding programs, this government agency provides SBA loan guarantees of up to 85% of the loan amount provided through an SBA-approved lender—typically banks. The three main SBA loan programs let you borrow money for nearly any business purpose—including working capital, purchasing inventory or equipment, refinancing other debts, or buying real estate—through these SBA-guaranteed loans.

Speed

2 weeks

Interest Rates

Starting at 6%

Max Loan Amount

$5K - $5M

Loan Term

5 - 25 years

SBA Loan Comparison

NameEconomic Injury Disaster Loan (EIDL) SBA 7(b) LoanPaycheck Protection Program (PPP) SBA 7(a) Loan (Link With Instructions To Apply)
Maximum Loan Amount $2 Million The Lesser of $10 Million OR 2.5 months of average prior year monthly payroll, mortgage, rent, and debt PLUS the outstanding amount of a loan made under the SBA’s Disaster Loan Program between January 31, 2020 and the date on which such loan may be refinanced as part of this new program
Interest Rate 3.75% for businesses 2.75% for non-profits 0.5% for the first two years and will be refinanced at the end of the two years for a rate of up to 4.0% for a term of 10 years (this applies for businesses - sole propiertors and non-profit)
Loan Term Up to 30 Years Up to 10 Years
Deferment Up to One Year Up to One Year
Covered Period 1/31/2020 - depending on the State of the applicant 2/15/2020 - 6/30/2020
Grant Component Yes Up to $10,000 Advance Don’t have to pay back if you don’t get the loan Available 3 days after loan being assigned to a loan officer Can apply based on credit score only Self-certification by applicant under penalty of perjury No
Loan Forgiveness No When the proper documentation is provided to the lender, then the amounts of the payroll (including independet contractors and owners payments) - rent - mortgage and utilities paid during the first 8 weeks after the loan has been disbursed, will be come forgivable as long as: Full Documentation of those payments is provided and the amount of payroll and independent contractors paid is 75% or more of the total amount requested to be forgiven Forgiveness amount is reduced for employee cuts or reduction in wages Max per employee compensation is $100,000 (prorated for the timeframe) Forgiven debt is excluded from gross income (i.e. is tax free) the remaining amount will be financed at 0.5% for the first two years and refinanced at that point for a rate of up to 4% Forgiveness amount to be paid to loan holder by Administrator within 90 days after forgiveness amount is determined (Loan Forgiveness will be reduced if you decrease salaries and wages by more than 25% for any emloyee that made less than $100,000.00 annualized in 2019) You will have until 06-30-2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020
Eligibility Must have been in a declared disaster loan (all states are as of 3/28/2020 - not all counties are) Small business (500 or fewer employees) Can be Sole Proprietor or Independent Contractor, LLCs, Partnerships, C Corporations, S Corporations A cooperative with not more than 500 Employees Businesses without employees or independent contractors are eligible Private non-profit Must have been in business on 3/1/2020 Paid employees salaries and payroll taxes, or paid independent contractors Must have been substantially impacted by COVID-19 Can be Sole Proprietor or Independent Contractor, LLCs, Partnerships, C Corporations, S Corporations Businesses without employees or independent contractors are eligible 501(c)(3) Non-profits
Eligible Use of Proceeds May be used to pay for used for fixed (existing) debts, accounts payable, payroll, medical leave, sick leave, salaries, health benefits, mortgage payments, rent, utilities, insurance, and existing debt that cannot be paid because of the impact of COVID-19 Cannot be used refinancing, expansion, or growth May be used to pay for used for fixed (existing) debts, accounts payable, payroll, medical leave, sick leave, salaries, health benefits, mortgage payments, rent, utilities, insurance, and existing debt that cannot be paid because of the impact of COVID-19 Cannot be used refinancing, expansion, or growth
Collateral Required Business assets and potential personal assets from more than 20% owners. No real estate collateral will be required Loan will not be denied just because there is no collateral. (However, the SBA will place a UCC lien against the assets of the business if applicable and dertermined thorugh the underwriting process) None
Personal Guarantee For $200,000 or less loan - none For greater than $200,000, all 20% owners must provide personal guarantees None Nonrecourse Loan
Prepayment Penalty None None
Guarantee Fees None None
Other Credit Sources Eligible even if credit is available elsewhere Eligible even if credit is available elsewhere
Refinancing May apply for additional funds if 7(b) funds initial loan amount turns out to be insufficient SBA loans made after 1/31/2020 and before this PPP loan date can be refinanced as part of the covered loan.
Impact on Other Loans and Programs An applicant may receive an EIDL Loan and loans under other programs (such as the Paycheck Protection Program described below) as long as the basis for the loans/costs being paid with each are different (no "double-dipping"). A loan under the Paycheck Protection Program makes the borrower ineligible for the Employee Retention Tax Credit made available under the CARES Act. This only applies to the Employee Retention Tax Credit in the CARES Act and does not apply to any credits available under the FFCRA (such as the paid sick leave tax credit) or other credits available under the CARES Act.
Approval Timeframe 3 Days for Advance Grant (after loan officer is assigned) 3+ Weeks for First Loan Disbursement Expected to be several days once available Details on applying not yet available
Where to Apply Where to Apply SBA.gov
Do I need to have filed my 2019 taxes to apply? No, 2019 Taxes do not have to be filed prior to applying for the loan. However, business will be asked to submit IRS Form 4506T which provides the SBA with access to historical returns Will depend on the lender
Funding Source Directly from SBA Banks will originate SBA will 100% Guarantee