Harris Financial-SBA Loan Article IMAGE

 

During the current coronavirus pandemic, the Small Business Administration (SBA), in conjunction with SBA-approved lenders, are offering relief options and loans in which small business owners are strongly encouraged to review.  (The SBA is an agency that provides loans and support to small businesses.)

Below is a summary of three options, noting that the devil is in the details, and further tweaking is likely to follow in the coming weeks and months.

ECONOMIC INJURY DISASTER LOAN (EIDL)

Covers financial obligations and operating expenses that could have been met had the disaster not occurred

  • $2 million maximum loan amount
  • $10,000 immediate advance
  • 3.75% interest rate for small businesses and 2.75% for non-profit organizations
  • 30-year maximum loan term
  • Repayment begins one year after the loan origination date and interest accrues during the loan deferment
  • Recent legislation removed the requirements that that the borrower (a) not be able to secure credit elsewhere or (b) must have been in business for at least one year, as long as the business was in operation on January 31, 2020
  • Loans may not be forgiven

PAYCHECK PROTECTION PROGRAM (PPP)

Covers payroll costs, group health care benefits, insurance premiums, interest on mortgages or other debt, and utility payments (exclusions apply)

  • $10 million maximum loan amount (based on calculated formula)
  • 1% interest rate
  • 10-year maximum loan term
  • Repayment begins six months after the loan origination date and interest accrues during the loan deferment
  • If you received an EIDL loan, you may be able to refinance it into the lower-interest PPP loan
  • Loans may be forgiven but the forgiveness amount is calculated according to a formula.
  • Importantly, a forgiven loan would not allow the business owner to claim the payroll tax credit or deferral of payroll tax now being offered under the Coronavirus Aid, Relief, and Economic Security Act (CARES).

SBA EXPRESS BRIDGE LOANS

Pilot program providing cash while waiting for a decision and disbursement on an Economic Injury Disaster Loan (EIDL) loan

  • $25,000 maximum loan amount
  • Repaid in full or in-part by proceeds from the EIDL loan

As you can see, would-be borrowers have much to consider. We strongly encourage you to visit the SBA’s “Coronavirus Relief Options” online here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options.

We also encourage you to contact your bank or lender to ask if they are eligible to participate in such programs. Should you choose to move forward with a loan and require documents sent directly to your lender, we are glad assist you.

Sincerely,

Harris Financial Advisors, Inc.