There are two main loans: (1) the Revised Economic Disaster Loan (“EIDL”) and (2) the Paycheck Protection Program loan (“PPP”). You can apply for the EIDL directly on the SBA website. You can apply for the PPP with your local bank. If you follow certain requirements, a significant portion of the PPP loan may be forgiven.

Blue Williams, LLC’s Commercial Transactions and Business Practices Group is here to answer your questions on both loans. Our contact information can be found below.

1. REVISED ECONOMIC INJURY DISASTER LOANS
EIDLs are loans available to small businesses and non-profit organizations through the U.S. Small Business Administration (“SBA”) to provide financial assistance during the COVID-19 crisis. Under the recently-passed CARES Act, certain terms and conditions of EIDLs have been relaxed or expanded. The SBA has recently issued the following notice regarding EIDLs:

The SBA established a new on-line EIDL application for those who have and those who have not already applied for an EIDL.  Under the CARES Act, EIDLs are available to most business over or under 500 employees, regardless of their structure. The new on-line EIDL application provides for an advance of up to $10,000 from the SBA within three (3) days of the SBA’s receipt an EIDL on-line application. These advances can be used for any allowable purpose for EIDLs, including maintaining payroll and operational integrity as a result of the COVID-19 crisis. If used for an allowable purpose, these advances are deemed grants that do NOT need to be repaid, even if an EIDL is not subsequently approved or accepted.  Regardless of whether you decide to proceed with accepting an EIDL, we strongly recommend that you complete the on-line EIDL application in order to obtain up to $10,000 in grant funds. 

If you wish to proceed with an EIDL, please note the following:

• EIDLs are directly administered by the SBA.
• Interest: 3.75% interest for small business and 2.75% interest for non-profits.
• Loan Amounts: Limited up to $2 million.
• Loan Terms: Terms can vary to a maximum of 30 years on case-by-case basis.
• Credit History: Applicant must have credit history acceptable to the SBA.
• Available Credit: Waives requirement that the applicant be able to find credit elsewhere.
• Repayment Ability: Applicant does not need to prove ability to repay.
• Personal Guarantee: Waives the personal guarantee requirement for advances and loans under $200,000.
• Collateral: No required collateral for loans under $25,000.
• Years in Business: Waives requirement that the applicant be in business for one year before the disaster.
• Insurance: Applicant may be required to obtain and maintain appropriate insurance.
• Refinance: Businesses that were issued an EIDL prior to the creation of the Paycheck Protection Program (PPP) may be eligible to refinance their EIDL to a PPP loan.
• Payment Deferral: No payments are due until the end of 2020.
• Use of Funds: Loan proceeds can be used for working capital, payroll costs, and other business expenses.

You will need the following information to complete the EIDL application:

• Business legal name, trade name, address, organization type, e-mail, date of establishment, and tax information (EIN, SSN, etc.).
• Gross revenues for the 12 month period ended January 31, 2020.
• Cost of goods sold for the 12 month period ended January 31, 2020.
• Number of employees as of January 31, 2020.
• Rental properties (residential and commercial only), lost rents due to the disaster.
• Non-profit costs of operations for the 12 month period ended January 31, 2020.
• Compensation from other sources received as a result of the disaster, and brief descriptions of other compensation sources.
• Current ownership structure.
• Business owner information (names, titles, SSNs, dates of birth, ownership %).
• Make sure to check the box that states: “I would like to be considered for an advance of up to $10,000.”
• Banking information on where to wire funds (routing and account number, account name).

2. PAYCHECK PROTECTION PROGRAM LOANS

The CARES Act also provided for the PPP. This program provides loans subject to forgiveness from February 15, 2020 to June 30, 2020 to businesses and certain individuals as a result of the COVID-19 pandemic.

The following types of entities and individuals can qualify for PPP loans:

• Businesses, 501(c)(3) non-profit organizations, 501(c)(19) veteran’s organizations, and tribal businesses that either employ 500 or fewer employees or employ not more than the size standard established by the SBA for their industry.
• Sole proprietors, independent contractors, and self-employed individuals, subject to the provision of specific documentation, such as Form 1099-MISC and profit and loss statements necessary to establish eligibility.
• A food or accommodation business that has more than one physical location, but is designated under NAICS code 72, provided each location does not employ more than 500 employees.

• PPP loans will be administered through local banks and guaranteed by the SBA.  We have attached information recently released by the SBA regarding the PPP and a list of Louisiana banks that will participate in the PPP.
• General Requirements:

• • Business was in existence on February 15, 2020.
  • Business was paying its employees or independent contractors prior to February 15, 2020.

• Interest:  The interest rates is currently set at 0.50%.  The interest will be the same for everyone. The SBA application fees will be waived.

• Collateral:  No collateral or personal guarantee shall be required for the loan by the SBA.  However, the local banks may have collateral and guarantee requirements.
• Loan Amount:  Loans are limited or the lesser of (i) 2.5 times the average monthly Payroll Costs during the 12 months immediately preceding the PPP loan application or (ii) $10,000,000.

• • Mortgage or loan interest.
  • Utilities: Electricity, gas, and water, Telephone, Internet, IT services, Software services.
  • Rent: Property, including property leased by a business back to itself, Equipment leases, Aircraft leases.
  • Payroll Costs up to $100,000 per employee on an annualized basis, based on:

• • • Salaries, wages, commissions, and tips.
    • Vacation, sick, and medical leave pay, except for sick leave already being credited through the Families First Act.
    • Group health care benefit premiums, including vision, dental, disability, supplemental, etc.
    • Retirement benefits.
    • Severance payments.
    • State or local employment taxes, but not payroll taxes, income taxes, or railroad retirement.
    • Contractor payments.
    • Special calculation rules apply for seasonal workers and self-employed individuals.
    • Payroll shall not include employees with primary residences outside the U.S.

 Follow RSS