In response to the COVID-19 pandemic, the U.S. government has passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide financial relief to people and businesses during this time. The CARES Act modifies an existing Small Business Administration (SBA) loan program called the Economic Injury Disaster Loan (EIDL) and introduces a new loan program called the Paycheck Protection Program (PPP).
The extension of the EIDL program allows small businesses to apply for loans up to $10,000. Upon approval of the application, funds will be quickly distributed within three (3) days and this loan advance will not have to be repaid.
The new PPP program allows for a larger loan, but comes with some stipulations. Here are the highlights:
- The business must qualify as a Small Business.
- The business must have been in operation on February 15, 2020.
- The business must have had employees for whom the borrower paid salaries and payroll taxes or paid independent contractors.
The maximum amount that can be borrowed is 2.5 times the average total monthly payroll in one year.
PPP loan money must be used to pay for the following:
- Payroll costs (salaries and payroll taxes)
- Group healthcare (including sick/family leave and insurance premiums)
- Rent and Utilities
- Interest on other debt incurred during this period
Details about the loan itself include:
- Maximum loan terms: 10 years
- Maximum interest rate: 4%
- Deferred payment between 6-12 months
- No fees, no personal guarantee required, and no collateral required
To find out more information, visit the U.S. Small Business Administration website at https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources.