31 Mar NEW: SBA Loan Comparison and Resources – All Three (3) – As of 3/27/2020
The Three (3) SBA Small Business Loans Available Due to the COVID-19 Financial Crisis
No doubt, there is a lot of confusion out there about the SBA business loans that are available now during the COVID-19 crisis. So, we have gathered information here to benefit you. Some of this information seems to change often depending on the media source, even from our government and affiliated credible sources, as the information is interpreted as it comes available. Here is what we know now from the credible sources below in the links provided (as of 3/27/2020).
Here is a summary of all three (3) SBA loans in Florida (as of 3/27/2020)
The SBA Economic Injury Emergency BRIDGE loan (EBL)- Florida
We sent out a newsletter about this loan detailing it on March 19. If you missed it, here are the details again (and some below): Click here.
Since then, we have learned the following from a source that was on the SBA conference call today. The $50 million in the fund won’t go very far, because of the amount of Florida small businesses applying for it. Still, other sources state that you should still try to apply if you qualify.
Here is a new link to a video explaining more on the Florida Bridge loan, we recommend watching it below.
- Up to $50 million has been allocated for the program in Florida.
- Small business owners that are employers with two (2) to one hundred (100) employees located in Florida affected by COVID-19 can apply for short-term loans up to $50,000. Loans above $50,000, up to $100,000, may be granted in special need situations.
- Term of loan is one (1) year. Loans will be interest-free for one (1) year, the interest rate will be 12% per annum on the unpaid balance thereafter until the loan balance is repaid in full. Loan default is subject to a normal commercial collection process.
- These loans are interest-free for up to one (1) year and are designed to bridge the gap to either federal SBA loans or commercially available loans. These are NOT grants.
- Florida Small Business Emergency Bridge Loans require repayment by the approved applicant from their longer-term financial resources.
- The Florida Department of Economic Opportunity will work with every borrower to ensure that repayment of the loan isn’t an overwhelming burden.
- The applicant must be able to demonstrate economic injury as a result of the designated disaster. The need for the loan and use of proceeds must be directly related to the economic injury caused by the designated disaster.
- Loans will be made to individuals who, individually or collectively, own at least 51% of the equity of the business. Only one (1) loan may be made per eligible business.
- The borrower will be required to sign an agreement that the proceeds of the loan will be used only for purposes of maintaining or restarting the business in the designated area. Use of proceeds to pay off debts already incurred for qualifying business maintenance or restart purposes may be authorized on a case-by-case basis.
- Be a for-profit, privately held small business that maintains a place of business in the state of Florida.
- To be eligible, a business must have been established prior to March 9.
- The application period runs through May 8.
Below are links for more information on the SBA loan program:
- For eligibility requirements and the loan process
- To apply for the SBA bridge loan – Click here
- Required information for application
- Loan FAQs
QUESTIONS?: For questions regarding the Emergency Bridge Loan Program, contact the Florida Small Business Development Center Network by calling 866-737-7232 or by emailing disaster@FloridaSBDC.org. To contact your local SBDC office: http://floridasbdc.org/locations/
The SBA Economic Injury Disaster Loan (EIDL) – Coronavirus
- Qualified Applicant: For small businesses, small agricultural cooperatives, small businesses engaged in aquaculture and most private nonprofit organizations.
- Amount: Up to $2 million in economic assistance. Loan amounts are set by the SBA and based on each applicant’s financial condition.
- Term: Up to 30 years.
- Interest Rate: Interest rates offered as low as 3.75% for businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for nonprofits is 2.75%.
- From the SBA: The first $25,000 of the loan will NOT be secured. Any amounts above that will be secured by collateral. Once the loan is accepted you can determine if you want only $25,000 unsecured, or if you prefer to receive more than $25,000 (secured) if the option of more is available.
- Deadline: You have until December 18, 2020 to apply.
- SBA completion time for loan processing: Unknown as of now
- We have heard that the online application process can become ‘bogged down’ with applicants. So, it has been advised to download the forms, fill them out and then upload them to the site where indicated in the application online. Or, wait until ‘off-hours’ to apply online when volumes of applicants are lower.
- For Free Local Assistance Applying or with Questions:
- SBA Resource Partners’ contact information can be obtained on the SBA website: Click Here.
- Also, you may also contact your local SBDC office for assistance or questions at:
Further information and resources:
Here is a link for information from the Florida SBDC here.
You may also visit the SBA Disaster Website for more information here.
IMPORTANT: Per Moritt Hock & Hamroff LLP law firm (3/26/2020): It appears at this time that borrowers would not be eligible for both the SBA Economic Injury Disaster Loan (EIDL) program and the revised SBA 7(a) loan under the CARES Act (at least to the extent that the use of proceeds is duplicative).
The SBA 7(a) Loan Under the “CARES Act”
Status: Not yet available – coming soon
This loan information is not final as of today (3/27/2020) as the CARES Act has been signed into law only hours ago, and the interpretation by the government entities that will carry out this loan has not been provided. There will be more details coming from us soon as there is further information and interpretation becomes available.
It is our understanding now (waiting on further guidance) that these loans will equal the lesser of $10 million or 2.5 times the average aggregate payroll over the twelve (12) month period before February 15, 2020. We are also waiting for further guidance on what twelve-month period (is it calendar year 2019, etc.?).
Further guidance will come about issues with this if employee pay drops below 25% (for example) during the loan forgiveness period (March 1 – June 30, 2020), and about how to calculate the payroll costs of the loan (full-time equivalents, etc.).
Our current understanding is that if the payroll rules are followed (see below) that any forgiveness of debt on the loans would not be taxable.
You may want to consider taking a loan amount equal to what you want, or plan to have, forgiven.
***The following content was interpreted, and written, by the law firm Moritt Hock & Hamroff LLP on 3/26/2020, and can be found here.
IMPORTANT: Per Moritt Hock & Hamroff LLP law firm (3/26/2020 – see link above): It appears at this time that borrowers would not be eligible for both the SBA Economic Injury Disaster Loan (EIDL) program and the revised SBA 7(a) loan under the CARES Act (at least to the extent that the use of proceeds is duplicative).
Overview of CARES Act SBA 7a Loan (per Moritt Hock & Hamroff LLC on 3/26/2020):
- The covered loan period will begin on February 15, 2020 and will end on December 31, 2020
- The maximum SBA 7(a) loan amount will increase to $10,000,000 (up from $5,000,000) through December 31, 2020
- SBA Express loan program limit will increase to $1,000,000 (up from $350,000) through December 31, 2020, and thereafter will have a maximum amount of $500,000
- Eligible small businesses as those with fewer than 500 employees, unless the covered industry’s SBA size standard allows more than 500 employees. Not-for-profit entities (excluding those that receive Medicaid reimbursement) and veteran organizations with 500 or fewer employees, sole proprietors, independent contractors and other self-employed persons are also eligible for assistance
- Permitted use of SBA 7(a) loan proceeds will be expanded to include payroll support, such as paid sick or medical leave, employee salaries, mortgage payments, rent expenses, and any other debt obligations
- To the extent the SBA 7(a) loan process are used to fund payroll costs during the period of March 1, 2020 through June 30, 2020, the loan can be forgiven (but will remain subject to taxation as forgiven debt)
- To determine a small business’s eligibility, the CARES Act would require lenders to determine: (1) whether a business was operational on February 15, 2020, (2) whether the business had employees for whom it paid salaries and payroll taxes, or paid independent contractors, and (3) whether the business has been substantially impacted by COVID-19
- To streamline and expedite the application process, the legislation would delegate more authority to local lenders to determine eligibility and creditworthiness without requiring them to go through all of the usual SBA channels
- Decreased origination fees in the term of waiver of both lender and borrower fees
- The government’s guarantee of the loan will increase to 100% through December 31, 2020 and will return to prior levels thereafter
- Complete payment deferment for SBA 7(a) loan payments for a period not to exceed one year
While the exact application process for a SBA 7(a) loan pursuant to the CARES Act is not known at this time, we believe that borrowers can reasonably expect to provide the following:
- SBA 7(a) loans are given through approved local lenders, not the SBA directly. Borrowers should reach out to their local lenders (banks, etc.) now in order to get ahead of the anticipated rush
- Borrowers should be prepared to complete the SBA application, addendums thereto and to provide the documentation required therein. While this application may change, it is better to be over prepared at this time than to face delays while tracking down information. More information regarding the existing SBA application process can be found at: https://www.sba.gov/loans-grants/see-what-sba-offers/sba-loan-programs/general-small-business-loans-7a/7a-loan-application-checklist%20
- Provide a good faith certification (and possibly supporting documentation) that your business has been affected by COVID-19 and that the loan process will be used for worker retention, for payroll expenses and for the payment of other business debts
The CARES Act will greatly assist many small businesses in keeping its workforce employed which will greatly facilitate the ability to get back to business as usual as the COVID-19 pandemic winds down over the future months.
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FURTHER COVID-19 UPDATE INFORMATION
We will be keeping you updated on small business and individual stimulus changes and tax changes during these times as it pertains to COVID-19. There are a lot of different opinions and commentary online about the stimulus that will be coming out soon. We will not provide speculation, rather we will only provide facts as soon as they are available. So, we will continue to proactively send out information as it becomes finalized and real. We will do so via these newsletters, on our website link for COVID-19 resources and information and on our Facebook page.
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