The Federal Government has passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to help small businesses cope with the economic downturn caused by the COVID-19 pandemic. The CARES Act includes both low-interest forgivable payroll protection loans through the Payroll Protection Program (“PPP”) and Economic Injury Disaster Loans (EIDL).

Payroll Protection Program

The PPP was enacted as a part of the initiative to keep American workers paid and employed. This program authorized up to $349 billion in forgivable loans to small businesses to maintain their payroll during the crisis.  Starting April 3, 2020, small businesses can apply through an SBA-approved lender for loans of up to $10 million dollars to cover payroll, mortgage interest/rent, and utility costs accruing over the 8-week period after the loan is made. These loans do not require collateral or personal guarantees.  The entire loan may be forgiven if it is used to pay those approved costs and maintain your existing staff for 8 weeks.

The forgiveness can be reduced if you do not maintain your existing staff or use more than 25% of the funds to pay non-payroll costs. Any part of the loan not forgiven will be on a 2-year term at 1%, and payments are deferred for 6 months.

These loans are originated and disbursed only by qualified SBA lenders, and funds will be distributed to approved applicants on a first-come first-served basis. More than 100,000 businesses applied for the PPP on the first day of the program, so it is in your best interest to act fast. Check out the Treasury Department’s fact sheet for more information and to see if you qualify.

Economic Injury Disaster Loans

EIDL loans have been around for some time and are intended to help businesses in the aftermath of natural disasters.  The CARES Act extended EIDL loans to the COVID-19 pandemic.  These loans are available for small businesses up to $2 million and up to 30 year terms.  Unlike the PPP loans, EIDL loans generally do require a personal guaranty and/or collateral.  As a part of the Act, businesses can qualify for a $10,000 immediate grant which will not need to be repaid as a part of the loan.  The Act also waives the standard SBA requirement that the “borrower cannot get credit elsewhere,” and the first $200,000 borrowed does not require a personal guaranty.

Click here to see if you qualify for an EIDL loan.

Click here to find an SBA lender in your area for either loan program.

As always, the attorneys at SJJ are standing by to help with questions and to assist your business through these uncertain times.  Call us today with any questions.