Everything you need to know about small business funding options

By DAVID LOPEZ
editor@sbnewspaper.com

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses.

Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

Both the San Benito and the South Padre Island Chambers of Commerce have been hosting webinars explaining the CARES Act, SBA loans and grants, and stimulus checks, among other things.

San Benito Chamber of Commerce Executive Director Megan Treviño said she has assisted multiple local businesses with the SBA (EIDL application).

“It’s an easy process. The SBA has streamlined their application,” Treviño said. “But it could take at least a month to get approved.”

Treviño encourages businesses to reach out to her if they have questions regarding funding or if they need assistance with the SBA (EIDL) application.

Small businesses and sole proprietors can apply as of April 3. Independent contractors and self-employed individuals can apply beginning April 10.

Frequently Asked Questions for SBA (EIDL) Loans & Grant
Who is Eligible?
You are eligible if you are:
• A small business with fewer than 500 employees
• A small business that otherwise meets the SBA’s size standard
• A 501(c)(3) with fewer than 500 employees, as well as, faith-based organizations including houses of worship
• An individual who operates as a sole proprietor
• An individual who operates as an independent contractor
• An individual who is self-employed who regularly carries on any trade or business
• A Tribal business concern that meets the SBA size standard
• A 501(c)(19) Veterans Organization that meets the SBA size standard
In addition, some special rules may make you eligible:
• If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
• If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply
REMEMBER: The 500-employee threshold includes all employees: full-time, part-time, and any other status.

What can the funds be used for?
Fixed debts, payroll, accounts payable, and other operational expenses

What is the interest rate?
3.75% interest rate for small businesses and 2.75% for private non-profits

What are the repayment terms?
The long-term repayments for the COVID crisis will be 30 years, however, there is no penalty if the loan is repaid in advance of the 30 years.

How does the $10,000 Loan Advance work?
When applying for the SBA (EIDL) loan, you can mark that you would like to be considered for up to $10,000 Loan advance. These funds would be made available within three days of successful application. These funds require no-repayment.

Where do I check the status of my application?
Contact the SBA by email at disastercustomerservice@sba.gov or call 1-800-659-2955. You will need to provide them with your application number.

Frequently asked questions on the PPP.
Who is eligible for these loans?
Small businesses, private non-profits 501(c) 3, Veteran organizations 501 c (19), tribal business concerns, faith-based organizations including houses of worship

Do I have to put up collateral?
No.

Where should a business apply?
At any bank or other financial institution authorized to provide Small Business Administration loans. Farm Credit Institutions are eligible to provide these loans as well. First Community Bank is offering the application to their current customers. The SBA recommends you check with your current lender first, however, you can reach out to other lenders. Participating banks include JPMorgan Chase, Texas Regional Bank, Capital One, BBA, PlainsCapital Bank, Vantage Bank, Lone Star National Bank, International Bank of Commerce, and Security Service Federal Credit Union. You can also visit sba.gov/paycheckprotection/find to view a list of lenders.

When should a business apply?
Immediately. Applications will end on June 30, 2020, or until funding lasts.

How much may I borrow?
You are allowed to borrow up to eight weeks of your payroll including benefits plus an additional 25% of that amount. You must calculate your average monthly payroll costs. Some costs cannot be included. For example, salaries over $100,000 must be prorated. Independent contractor costs MAY NOT be included.
Those contractors are considered independent businesses and must apply on their own.

What is the interest rate?
The federal government is setting the interest rate at 1%.

How long can this loan run?
Up to two years.

What will the bank ask me to show?
Banks are reportedly using a variety of processes, with the community banks being reported as being fastest out of the gate. You will be required to show calculations about your payroll and other costs, and certify that you are following the rules. For certification, you simply have to certify that you are meeting the various criteria, including your intent to use the money primarily for payroll. More extensive certification will be needed for the forgiveness phase.

When must I begin repayment?
Payments begin six months after you receive the funds. Interest will accrue during those six months. But some or all of this loan may be forgiven.

May I apply for more than one loan?
No, you can only apply for the PPP once, but you can apply for any other SBA assistance as long as it is not used towards the same expenses.

How will loan forgiveness work?
The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest. That is if the borrower uses all of the loan proceeds for forgivable purposes.

What if things don’t work out as I planned and I am unable to use 75% of the funds for payroll?
If you furloughed or laid off any employees after Feb. 15, you will have until June 20 to restore full payroll. If you cannot maintain a full payroll for the next six months, a portion of your loan may not be forgiven and you will have to pay all or part back. If you are found to have intentionally violated the requirements, you may be subject to fraud charges. Knowingly-made false statements are subject to both fines and imprisonment.

Does the bank make money on these loans?
SBA is paying processing fees to banks of 5% for loans under $350,000; 3% for loans between $350,000 and $2 Million and 1% for loans in excess of $2 million.

Permanent link to this article: https://www.sbnewspaper.com/2020/04/13/everything-you-need-to-know-about-small-business-funding-options/

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