Accessing SBA’s Disaster Relief Loans as a Result of COVID-19: KSM Can Help
KSM is offering, as a service, help with BHPH/LHPH dealers applying for the first SBA loan, but the second one is applied through your banker.
SBA Economic Injury Disaster Loans (EIDL)
How the SBA EIDL Works
- The U.S. Small Business Administration (SBA) is offering states and territories low-interest federal disaster loans for working capital issued in amounts ranging from $25,000 up to $2 million to small businesses and not-for-profit organizations suffering substantial economic injury as a result of the coronavirus (COVID-19) outbreak.
- While many factors go into qualifying for an EIDL, a primary one is that a small business (less than 500 employees) has to show they have a financial impact or loss directly associated to COVID-19.
- The EIDL does not allow for loan forgiveness. An applicant applies directly to SBA and will be required to supply various documents that will then be processed and a long-term loan with a low interest rate could be issued.
- A critical component is the client will need to demonstrate they have been financially impacted as a result of COVID-19. As the entire nation has been declared a state of disaster, there are no disqualifications of other financing means that typically exist with this type of loan.
CARES Act Economic Stimulus Package – Loan Forgiveness Provision
What Is the CARES Act?
- The $2 trillion coronavirus stimulus package (CARES Act) will have an immediate impact on businesses and individuals across the country. The U.S. Senate unanimously passed the stimulus package March 25 and it will next head to the U.S. House of Representatives where a vote is expected March 26 or 27.
Loans for Small Businesses
- The package includes $350 billion that is being dedicated in loan guarantees and loan subsidies to prevent layoffs and business closures while workers have to stay home during the coronavirus outbreak. This loan will be administered by lending institutions and guaranteed by the SBA. Therefore, the application will be handled by the lending institution.
What Is the Loan Forgiveness Provision?
- Companies with 500 employees or less that maintain their payroll during the outbreak can receive up to eight (8) weeks of cash-flow assistance. If employers maintain payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven.
- There are many qualifiers that are being reviewed. It appears at this time that for the 8-week period from the date of the loan, if the payroll costs are the same or higher than the same 8-week period in the prior year, there is an eligible amount for forgiveness. The government’s goal is for businesses to keep employees on the payroll.
- An applicant can only take one of the above loans.
- From our discussions with lending institutions, for an SBA EIDL application that is complete and accurate, it generally takes several weeks for the loan to fund from the date of submission. However, interested applicants can and should still apply for an SBA EIDL.
- Small businesses will want to contact their bankers or a qualified lender service provider to discuss their current loan situation and gain their perspective on SBA loans. Applicants will be able to choose which funding they want to move forward with (EIDL or CARES Act) and turn down the funding from the other option.