On April 24, 2020, President Trump signed the Paycheck Protection Program Increase Act of 2020 into law. The new law expands and modifies the significant new resources for businesses from the U.S. Small Business Administration (SBA) that were established in previous legislation, including the CARES Act, replenishing funding for both PPP and EIDL loans.
The U.S. Senate Committee on Small Business and Entrepreneurship has prepared a Small Business Owner’s Guide to the CARES Act on all of the forthcoming federal resources. SBA has also established a dedicated page of Coronavirus (COVID-19): Small Business Guidance & Loan Resources for all current and pending assistance pertaining to economic relief during the current crisis.
New Jersey has also compiled information regarding other federal competitive grant opportunities, some of which are open to businesses.
Paycheck Protection Program (PPP)
UPDATE 5/21/2020: The U.S. Small Business Administration has published the application and instructions for PPP loan forgiveness [PDF].
The Paycheck Protection Program Act of 2020 allocated more than $320 billion to replenish funding for the PPP program. A subset of that funding is allocated as follows:
- $30 billion for loans made by Insured Depository Institutions and Credit Unions that have assets between $10 billion and $50 billion; and
- $30 billion for loans made by Community Financial Institutions, Small Insured Depository Institutions, and Credit Unions with assets less than $10 billion.
On March 31, SBA Administrator Jovita Carranza and Treasury Secretary Steven T. Mnuchin announced the implementation of The Paycheck Protection Program, established by the CARES Act. These new loans are designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
Loans can be up to 2.5x the borrower’s average monthly payroll costs, not to exceed $10 million.
Businesses can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
Lenders may begin processing loan applications as soon as April 3, 2020.
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of 2 years and an interest rate of 1.0%.
You are eligible to apply for a PPP loan if you are:
- A small business with 500 or fewer employees
- Defined as “small” by SBA Size Standard that allows for higher employee threshold or is revenue based; or
- A small business with maximum tangible net worth up to $15 million and the average net income for full 2 fiscal years prior to application does not exceed $5 million
- A 501(c)(3) with 500 or fewer employees
- A sole proprietor, independent contractor, or self-employed
- A Tribal business concern that meets the SBA size standard
- A 501(c)(19) Veterans Organization that meets the SBA size standard
Lenders will also ask you for a good faith certification that:
- The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
- The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
- Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
- From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold SBA Disaster Loans into a PPP loan)
More information and sample applications are available at: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
Economic Injury Disaster Loans (EIDLs)
With the additional funding provided by the Paycheck Protection Program Act of 2020, SBA will resume processing EIDL Loan and Advance applications that are already in the queue as of April 24, 2020, on a first come, first-served basis. SBA will provide further information on the availability of the EIDL portal to receive new applications (including those from agricultural enterprises) as soon as possible thereafter.
All New Jersey counties are now approved for federal disaster assistance, making New Jersey businesses eligible to apply for Economic Injury Disaster Loans (EIDLs). These are working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. These loans are intended to assist through the disaster recovery period.
To see whether you might qualify for this program, use the NJ COVID-19 Business Support Eligibility Wizard.
To be eligible for EIDL assistance, New Jersey-based small businesses or private non-profit organizations must have sustained economic injury, as well as being located in a disaster-declared county or contiguous county, which all New Jersey counties currently are.
- Credit History – Applicants must have a credit history acceptable to SBA.
- Repayment – Applicants must show the ability to repay the loan.
- Collateral – Collateral is required for all EIDL loans over $25,000. SBA takes real estate as collateral when it is available.
- SBA will not decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available.
The interest rate is determined by formulas set by law and is fixed for the life of the loan. The maximum interest rate for this program is 3.750 percent.
The law authorizes loan terms up to a maximum of 30 years. SBA will determine an appropriate installment payment based on the financial condition of each borrower, which in turn will determine the loan term.
The law limits EIDLs to $2,000,000 for alleviating economic injury caused by the disaster. The actual amount of each loan is limited to the economic injury determined by SBA, less business interruption insurance and other recoveries up to the administrative lending limit. SBA also considers potential contributions that are available from the business and/or its owner(s) or affiliates.
Applicants may apply online, receive additional disaster assistance information and download applications at covid19relief.sba.gov.
Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email firstname.lastname@example.org for more information on SBA disaster assistance. Individuals who are deaf or hard-of-hearing may call (800) 877-8339.
Completed applications should be mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155
Economic Injury Grants
These grants provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). To access the advance, you first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
SBA Debt Relief
As part of SBA's debt relief efforts,
- The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months.
- The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.
For current SBA Serviced Disaster (Home and Business) Loans: If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020.
What does an “automatic deferral” mean to borrowers?
- Interest will continue to accrue on the loan.
- 1201 monthly payment notices will continue to be mailed out which will reflect the loan is deferred and no payment is due.
- The deferment will NOT cancel any established Preauthorized Debit (PAD) or recurring payments on your loan. Borrowers that have established a PAD through Pay.Gov or an OnLine Bill Pay Service are responsible for canceling these recurring payments. Borrowers that had SBA establish a PAD through Pay.gov will have to contact their SBA servicing office to cancel the PAD.
- Borrowers preferring to continue making regular payments during the deferment period may continue remitting payments during the deferment period. SBA will apply those payments normally as if there was no deferment.
- After this automatic deferment period, borrowers will be required to resume making regular principal and interest payments.Borrowers that cancelled recurring payments will need to reestablish the recurring payment.
- More information can be found here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/sba-debt-relief
Express Bridge Loan Pilot Program
This program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loans or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for decision and disbursement on an Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan of up to $25,000.
Updated: May 21, 2020
Source: SBA Disaster Assistance in Response to the Coronavirus