Crisis Management

One of the core pieces of the CARES Act, which the Senate passed with a vote of 96-0 on March 25th, is the provision of $349 billion for small businesses through federally backed loans under a modified and expanded Small Business Administration (SBA) 7(a) loan guaranty program called the Paycheck Protection Program. The program allows for loan forgiveness, which is available for funds used to pay 8 weeks of payroll and other qualified expenses incurred prior to February 15, 2020. 

It is important to note that, according to Venable LLP, "borrowers may apply for an EIDL grant in addition to a loan under the Paycheck Protection Program, provided the loans are not used for the same purpose. If a borrower received a loan under 7(b)(2) after January 31, 2020, the borrower may refinance the outstanding balance as part of a loan under the Program." Chambers are encouraging small businesses apply for the EIDL (see details below) but to keep in mind the following:

If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP (from Paycheck Protection Program FAQs for Small Businesses).

Read more in the resources below.

The Bridge Loan Pilot Program will operate for a limited time, unless extended or made a permanent part of the SBA’s loan programs.

The signing of H.R.6074 - Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 on March 6th provided the Office of Disaster Assistance at the SBA, with additional disaster loan funds and expanded definition of a disaster to include coronavirus. The SBA now has authority to declare a virus or pandemic as a disaster, whereas disasters have largely been localized by territories impacted by physical disasters such as hurricanes or earthquakes.

The process, terms, and interest rate are described on the SBA website as:

• The loans offer up to $2 million in assistance to small businesses to help overcome the temporary loss of revenue.
• The funds may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
• The loans offer long-term repayments up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
• There is an automatic 1 year deferment on repayments; interest will begin accruing when the disbursement is made.

The SBA encourages businesses to apply online, which is faster and enables auto-generated notices as the application proceeds through the approval process. The SBA recommends recommends that applicants prepare their application by accessing the list of required forms.

More information and a description of the process is included in the presentation below.

Important Links