Two small-business loan programs will be given new life after a $484 billion coronavirus aid deal was finalized last week. The programs are created to relieve the economic devastation caused by the coronavirus.
The Small Business Administration and thousands of its affiliated banks in recent weeks were overwhelmed by an unexpectedly high amount of applications. This forced lending activities to temporarily halt. The program may be victorious in pumping hundreds of billions of dollars into a devastated economy of business communities quickly, but funds are still needed by many small companies.
There were several issues during the initial loan rollout including glitchy web portals, complex regulatory processes, a frustrating lack of cooperation from big banks, and bureaucracy that is struggling. Loans that were meant for Main Street businesses were given to some large hotel and restaurant chains resulting in prompts of calls for changes.
$250 billion was included in the bipartisan deal that was finalized last week for the Paycheck Protection Program. It’s a federal loan program newly created to allow qualified banks to offer loans with low-interests and can later be forgiven. A parallel program operated by the SBA called Economic Injury Disaster Loans also receives $60 billion.
Small businesses that are struggling and were left out of the initial round of funding will get another shot once the deal survives a vote in the House and receives the president’s signature.
Learn how your business can access the new funding with the below questions and answers:
The Treasury Department’s Cares Act resource page will display the most recent application form. You should contact an SBA-approved lender once you gather the information described in the form. You can plug your Zip code into an online tool on the SBA’s website to find one.
Applying online or by phone rather than in person is advised for borrowers. According to SVA and Treasury Department officials, your application will be handled on a first-come, first-served basis if you don’t already have an established banking relationship.
Disaster loan applications are traditionally accepted by SBA through an online portal on the website of the agency, by mail, or at its field offices.
However, due to the lapse in appropriations, the web portal is currently inactive. For the same reason, the agency is also unable to accept mailed applications. As soon as the SBA reactivates its online application, this section will be updated.
Yes, you can. If your business received a disaster loan, you have the option to refinance it into any Paycheck Protection Program loans you receive. This will give you a chance to lower the interest rate. But remember that a single business cannot apply for more than on PPP loan.
Paycheck Protection Program (PPP) - Businesses that meet the standard business-size definition of the SBA and veterans organizations organized under 501(c)(19) with fewer than 500 employees are qualified to apply for the loan program. They can be small businesses, nonprofit organizations, and tribal businesses. If you are a self-employed individual, independent contractor, and sole proprietor, you are eligible as well. Your company must have been in business as of Feb. 15 in order to receive a loan. For as long as the other requirements of the Cares Act are met, churches also qualify as announced by SBA last April 18.
Individual locations of large hotel and restaurant chains can get loans although controversy has been observed in that practice. Shake Shack, for instance, was identified by the news as among several large restaurant and hotel chains that received small-business loans so they agreed to return their $10 million SBA-backed loans.
SBA disaster loans - If your business has fewer than 500 employees and it can’t pay the bills because of the coronavirus, you can apply for the loan program.
Submitting fraudulent information to a federally insured lender have criminal penalties of up to $1 million.
If you need complete information regarding the cares Act, you can see the fullBill, here.
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