March 28, 2020
You will soon hear the terms SBA 7(a) program and “Payroll Protection Program” as an important and significant program to help virtually every small business in the nation.
While labeled as a “loan program,” it in fact can operate as a generous grant program for any business or non-profit under 500 employees. The “loan” is 2.5 times your monthly payroll expenses. More details are available in this article from National Law Review.
Here are the key features:
- You apply for a “loan” through an SBA-approved lender. Here is the SBA link to Cincinnati-Area approved lenders. The Cincinnati-area list is very short: US Bank, Fifth Third Bank, The Huntington National Bank, First Financial Bank, PNC Bank, Center Bank and People’s Bank from Marietta.
- The “loan” is in an amount that is 2.5 times your monthly business’ payroll, being the monthly average over the 12 months prior to the date the loan is made.
- The “loan” is in a maximum amount of no more than $10 million.
- The “loan” has no fees associated with it.
- The “loan” requires no personal guarantees.
- The “loan” requires no collateral.
- The “loan” does not require proof that funds cannot be received elsewhere.
- The “loan” has a simplified application process.
- The “loan” will be funded quickly to avoid the economic impact of the COVID-19 crisis.
- Most importantly, borrowers are eligible for loan forgiveness equivalent to the sum spent on covered expenses during the eight-week period after the loan is originated.
- Covered expenses include wages, benefits, rent, mortgage payments, and utility charges.
- The “loan” is forgiven if you maintain your pre-crisis level of full-time equivalent employees for eight weeks after the loan is made.
- If you fall below that level of employment, your loan forgiveness is reduced in proportion to the reduction in headcount. The same applies to salary reductions.
- If you already have made staffing reductions, you qualify for loan forgiveness if you re-hire back to pre-crisis levels by June 30, 2020.
- You do not need to demonstrate actual economic harm in order to qualify. Rather, you simply need to make a series of good faith certifications, primarily that (a) current economic conditions necessitate the loan to support ongoing business operations, and (b) that the funds will be used to maintain payroll and address other covered expenses.
In order to apply, you need to contact an SBA-approved lender Qualified SBA lenders are awaiting further instruction from the SBA. Contact your lender to get on their email list to obtain application instructions as they become available. We will update this BLOG as new information is forthcoming.
Here is an excellent article explaining the Payroll Protection Program from Inc. Magazine.
You may contact attorney Christopher Finney (513.943.6655 (o) or 513.720.2996 (c)) at any time for more information.