COVID-19 Update: Paycheck Protection Program and Economic Injury Disaster Loan
April 1, 2020
NOTE: Due to the recent enactment of this legislation this guide is subject to modification and/or amendment. Contact Grady & Riley for the most up-to-date information as this situation is subject to further change at any time
There are two programs that small businesses can avail themselves of as a result of COVID-19, also known as the Coronavirus.
I. Paycheck Protection Program (“PPP”)
a. Who is eligible?
In order to qualify for PPP, a business must have less than 500 employees and be affected by the coronavirus. Businesses in certain industries may have more than 500 employees if they meet the SBA'S size standards for those industries. As it stands this program only applies to businesses that have or had employees.
b. How much can my business receive?
A business can receive up to $10 million dollars, or 2.5 times the business’ total payroll expenses for the loan period. There is an initial interest rate of 0.5%.
c. Is there forgiveness for the PPP?
Yes, there is forgiveness for the first eight weeks of the loan if employers pay their expenses and maintain or rehire employees. Seventy-five percent of the forgiveness almost certainly must be applied to payroll, with the remainder being applied to rent/mortgage interest, utilities, and possibly other, related expenses. No personal guaranty is at this time required of the owners.
d. Where do I apply?
Call your local banks. Many of them will have additional information. More information on the PPP can be found here. A PDF summary can be found here.
II. Economic Injury Disaster Loan (EIDL)
a. Who is eligible?
The EIDL is for businesses that prove substantial economic injury and is unable to pay ordinary and necessary operating expenses. The purpose of this loan is to provide cash to businesses to allow them to weather this pandemic. No physical damage is necessary.
b. How much can my business receive?
A business can receive up to $2 million.
c. Is there forgiveness for the PPP?
No. Unlike the PPP, there is no loan forgiveness. The loan interest rate is currently 3.75% but cannot exceed 4%. The length of the loan will not exceed 30 years. However, in response to the COVID-19 crisis, applicants can receive an emergency grant in the amount of $10,000 when submitting their request for an EIDL. The $10,000 grant would presumably be forgiven, except little guidance has been given to date.
d. Where do I apply?
Applications can be sent electronically at SBA.gov.
Note that it appears that if you currently have an EIDL you may be able to convert that loan to the PPP program for the loan forgiveness.
Please contact Grady & Riley, LLP for additional information on best strategies for your small business during this time.
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