Economic Injury Disaster Loan (EIDL)
•Declaration must first be made by state Governor to SBA with approval process to follow.
•Loans available up to $2 million.
•Loan interest rates are 3.75% for small businesses and 2.75% for nonprofits (currently, no there is no provision to lower the rates).
•Employers with 500 employees or less are eligible.
•Maximum loan term of up to 30 years (term is determined on a case-by-case basis).
•Must have applicable credit history.
•Must show ability to repay loan.
•Collateral is required for loans over $25,000. SBA accepts real estate as collateral when applicable. SBA will not decline a loan for lack of collateral and will require borrower pledge collateral that is available.
Paycheck Protection Program (CARES Act)
•Loans available up to $10 million.
•Loan amount is calculated at 2.5 times average monthly payroll expenses over a 12-month period.
•Loan interest rates are 0.5% (Original rate under Cares Act was capped at 4%)
•Maximum loan term of up to 2 years (Original term in the Cares Act allowed 10 years)
•Must have applicable credit history
•Must show ability to repay loan. Note: CARES Act calls for deferment of payment is automatically 6 months and up to 1 year.
•Loan forgiveness is is a percentage of payroll costs, rent or mortgage interest, utilities, and other debt interest for the 8 week period after the loan originates.
Qualifications for loan forgiveness:
•75% of expenses in forgiven period must be from payroll to get loan forgiveness (NEW requirement as of 03/31/2020)
•Not for employees currently getting FFCRA sick or leave pay.
•Loan forgiveness can be reduced (not increased) by the following formula: # of FTE equivalents during period / # of FTE equivalents from January 1, 2020 to February 29, 2020 OR from February 15, 2019 to June 30, 2019
•Excess wages of employees over 100k annualized in 2019 are excluded from the loan calculation
•Employees with annualized salary of 100k or more during the 8 week covered period are excluded from forgiveness calculations
•Special calculations for seasonal employers.
•Loan will be reduced also by any wages for an employee who’s pay is now more than 25% higher than it was prior to the loan.
•If a loan is made, any officer whose total compensation (salary, bonus, stock or financial awards) is $425,000 or more in 2019 (unless in a collective bargaining agreement prior to 3/1/2020) cannot receive compensation more than the total compensation received in 2019.
•Businesses who receive Paycheck Protection Program loans to cover employee salaries, payroll support, mortgage or other debt obligations cannot also receive EIDL loans for the same purpose.
Be prepared (get the documentation ready!)
•Current financial information (income, balances of bank/credit accounts and monthly expenses).
Forms required for EIDL Loans:
-Form 5 - Business Loan Application
-P-019 - Economic Injury Disaster Loan Supporting Information
-SBA Form 413 - Personal Financial Statement
-Form 4506-T - For business, personal and any related businesses (ie. real estate partnership, etc.)
-SBA form 2202 - Schedule of Liabilities
•Additional information may be requested. Applicants have 7 days to respond to additional requests.
Forms required for PPP Loans:
-Form 2438 on the SBA website
-Payroll documentation from the last 12 months
-Approved lenders and banks may request additional information
Additional information that may be requested:
-2019 IRS Quarterly 940, 941 or 944 payroll tax reports.
-Last 12 months of Payroll Reports beginning with your last payroll date and going backwards 12 months.
-Payroll report must show the following for the time period above:
-Gross wages for each employee, including the officer(s) if paid W-2 wages.
-Paid time off for each employee.
-Vacation pay for each employee.
-Family medical leave pay for each employee.
-State and Local taxes assessed on the employee’s compensation for each employee.
-1099s for 2019 for independent contractors that would otherwise be an employee of your business.
-Do NOT include 1099s for services.
-Documentation showing total of all health insurance premiums paid by the Company Owner under a group health plan.
-Include all employees and the company owners.
-Document the sum of all retirement plan funding that was paid by the Company Owner (do not include funding that came from the employee’s out of their paycheck deferrals).
-Include all employees, including company owners.
-401K plans, Simple IRA, SEP IRAs.