What To Do!! A Guide For Small Businesses During This Covid-19 Pandemic
by Catrina Rodriguez | April 8, 2020 | Digital Marketing, Small Business, Marketing Strategy
During this pandemic and with the stay at home order in place, the most stressful thing for an entrepreneur or a small business owner is the idea of how to keep their business afloat. Less foot traffic means less business, less business means lesser hours for employees and less money coming in to pay the bills. So, what can you do to save your business in these troubling times?
The Congress just passed the Coronavirus Aid, Relief, and Economic Security (CARES) act. This act is intended to help business owners with whatever needs they have right now. One of the resources they currently have which was rolled out in April 4th, is called the Paycheck Protection Program (PPP).
Originally, this program was ran by the Small Business Administration (SBA), but due to the loan demand the government has decided to run through banks. So, what is PPP anyway and what banks are authorized to accept application for this loan?
Well… let me tell you all about it and where to apply (if you do decide this will be beneficial for your business).
Who is Eligible?
In general, any business (including sole proprietors) or non-profit organization that:
- was in operation on 2/15/2020, and
- has fewer than 500 employees, or
- has more than 500 employees, but has an NAICS code beginning with 72 and has fewer than 500 employees per physical location (generally hotels and hospitality businesses)
What Can you Use the Loan For?
Permitted uses of funds include:
- Payroll costs
- Costs related to the continuation of group health care benefits
- Payments of interest (not principal) on debt that was in place before 2/15/2020
****Payroll costs don’t include: compensation in excess of $100k annual salary, Federal payroll taxes, FML allowed to have credit from Coronavirus Relief Act passed last week .
What is the Interest Rate?
- 4.0% (it may be less, but it can’t be more)
What is the Maximum Term?
- 10 years
When Must I Start Repaying?
- Principal and interest payments will be deferred for at least six months, though borrowers may pre-pay the loan at any time without penalty.
Is There Opportunity for Forgiveness of Some of the Loan?
- A portion of the loan principal and interest used for eligible expenses will be forgiven. The amount forgiven will be the following expenses paid in the 8 weeks following the loan origination date:
o Payroll costs
o Interest (not principal) on a real estate loan that was in place before 2/15/2020
o Rent payments
o Utility payments
NOTE: The amount of loan forgiveness will be reduced if the borrower lays off employees or significantly reduces salaries. The formula determining the amount of reduction is generally summarized below:
o If the borrower has fewer full-time equivalent employees (“FTEs”) on average, per pay period, between 2/15/2020 and 6/30/2020compared to the same period in 2019, the loan forgiveness amount is decreased by the percentage of reduction in FTEs. The borrower can also choose to have their number of FTEs for 2/15/2020 – 6/30/2020compared to 1/1/2020 – 2/29/2020, and that percentage change can instead be used to determine the amount of the reduction, if any.
o If any employee’s salary has been reduced by 25% or more, the dollar amount of the decrease in excess of 25% will be deducted from the loan forgiveness amount. This will not apply to any employee who earned more than $100,000 on an annualized basis for at least one pay period in 2019.
o If the borrower has made layoffs or salary reductions but restores the FTE count and salary to the prior levels (per the formulas above) by 6/30/2020, there will be no reduction in the amount of loan forgiveness.
Are There Any Caveats To Getting the Loan?
Borrowers must make the following “good faith certifications”:
o “that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient”
o “acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments”
o “that the eligible recipient does not have an application pending for a loan under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan”
o “During the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received amounts under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan”
What Documentation is Required?
- Income statement for the prior twelve months specifically breaking out payroll expense on a monthly basis
- Payroll tax filings reported to the IRS (Forms 1099-MISC)
- Proof of existence before 2/15/2020 – such as articles of incorporation
- Other documents as required by the SBA (to be determined)
What are the Bank’s Required Criteria for Granting the Loan?
- Assuming they underwrite the loan within the SBA’s guarantee requirements, there is basically no risk to the bank. So, underwriting is pretty simple. In evaluating the eligibility of a borrower, the SBA asks the lender whether the borrower:
o Was in operation on 2/15/2020; and
o Had employees for whom the borrower paid salaries and payroll taxes; or
o Paid independent contractors, as reported on a Form 1099-MISC.
Is There Any Urgency in Applying?
- The CARES Act authorized $350 billion for guarantees on this program. If that amount is fully subscribed, it is expected the guarantee amount will be extended. Current feedback we are getting from local lenders is that within a week or two they will be ready to take applications and begin funding loans.
How Do I Apply?
- You can apply online through the SBA website, but it appears the best advice is to work directly with the bank. Because this program is being backed the SBA, you must work with an SBA-authorized lender. There are about 5,000 commercial banks in the country, and only about 800 are authorized.
BANKS AUTHORIZED TO ACCEPT PPP LOAN APPLICATIONS
National Banks Accepting PPP Loan Applications
– Chase Bank – https://recovery.chase.com/cares1
Regional and Local Banks Accepting PPP
– Ameris Bank – https://www.amerisbank.com/Paycheck-Protection-Program
– Celtic Bank – https://start.celticbank.com/paycheck-protection-program
– Citizens Bank – Contact your Citizens Bank relationships manager to start an application. Only existing Citizens Bank customers can apply.
– First Commonwealth Bank – https://www.fcbanking.com/why-us/contact-us/coronavirus-update/paycheck-protection-program-faqs/
–First Home Bank – https://www.firsthomebank.com/sbarelief/
– First United Bank – https://www.firstunitedbank.com/paycheck-protection-program
–Fulton Bank – https://www.fultonbank.com/CARES-Act
–Hanmi Bank – https://www.hanmi.com/covid19-support
– Live Oak Bank – https://www.liveoakbank
– Midwest BankCentre – https://www.midwestbankcentre.com/ppploan and e-mail application to: HeyOrvSTL@midwestbankcentre.com.https://www.pgbank.com/assets/files/Y6Kr6ewA and email application to: PGBCovid19PPPRelief@pgbank.com
– Peapack-Gladstone Bank– https://www.pgbank.com/assets/files/Y6Kr6ewA and email PGBCovid19PPPRelief@pgbank.com
– Pinnacle Bank- https://www.pnfp.com/sba-lending-in-a-pandemic/
– Sunflower Bank – https://forms.sunflowerbank.com/PaycheckProtectionProgram
– Univest Bank and Trust Co. – https://www.univest.net/paycheck-protection-program
– West Town Bank & Trust- https://westtownbank.com/content/paycheck-protection-program
Credit Unions and Non-Bank Lenders Accepting PPP Loan Applications
– America First Credit Union- https://www.americafirst.com/business-relief.html
– Fountainhead SBF LLC – https://www.fountainheadcc.com/apply-relief-loan/
– Ready Capital – https://go.readycapital.com/l/686683/2020-03-30/3747n
Hope this information helps small businesses out there!!
Stay safe. Practice Social Distancing and this too shall pass!
Catrina Rodriguez 💜
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