What You Need to Know about Disaster Relief for Covid-19
On April 1, Perry & Associates reported that the president officially signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. We responded quickly and created a special COVID response group. Our expert accountants are ready to answer your accounting questions regarding the financial relief package.
Since creating the COVID response group, we have received hundreds of questions about the CARES Act. We are working around the clock to provide accurate and thorough answers.
However, we understand many of you need to access funds quickly. That’s why we’ve curated six, frequently asked SBA Disaster Loan questions so that you can make the right choices for your business as soon as possible.
SBA Disaster Loans – FAQs
Am I eligible for a coronavirus SBA disaster loan?
You may apply for CARES Act funds if your business has fewer than 500 workers. This includes corporations, non-profits, sole proprietorships, contractors, and freelancers. There is assistance for larger businesses, but those programs fall outside the scope of this article.
Are all SBA disaster loans the same?
No. There are a few distinct programs to the CARES Act. The two most popular programs are the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL).
- The EIDL. These loans are made directly through the SBA, not local banks. After applying online, you may receive up to a $10,000 advance that will not have to be repaid whether or not you qualify for an additional loan. Additional loans can be maxed at $2 million and loans up to $200,000 don’t require personal collateral. Finally, an EIDL loan can’t go toward other loans or debt obligations. Apply here.
- The PPP. These are 100% federally backed loans used to cover payroll-related expenses through June 30th. These loans will be forgiven if businesses retain employees at compensation levels similar to pre-crisis levels. Loans are made through banks and third-party lenders. For more information, see our PPP section below.
When will I receive my relief funds?
For EIDL advances up to $10,000, you could see that deposit within three days of your application. For loans beyond the initial $10,000, most sites claim turnaround time is 2-3 weeks. However, many businesses have seen delays longer than that. Expect to wait a week or two longer than promised before funds are approved and delivered. This applies to PPP loans, too. This situation is ongoing and may resolve at any time.
Paycheck Protection Program Questions
What information do I need to apply for a PPP loan?
These SBA disaster loans are provided through local lenders and backed by the federal government. Contact your bank or SBA representative to submit an application. You will need to include documentation stating the total number of employees on payroll along with their 2019 salaries and compensation levels. Also, submit verification for mortgages and utility payments.
Once I receive my PPP SBA disaster loan, are there restrictions on how I use it?
Yes. As you might expect, the PPP requires borrowers to use funds toward payroll-related costs. Eligible costs include:
- Payroll administrative fees
- Health-care benefits
- Employee salaries, commissions, or similar compensation
- Rent and/or mortgage payments
- Interest on debts taken on before the crisis
There are also salary eligibility restrictions. For example, loans will not be forgiven if they go toward any compensation over $100,000 per employee or compensated employees live outside the USA.
What happens if my loans aren’t forgiven?
If PPP funds don’t meet eligibility requirements, they might not be forgiven. Loans can only be forgiven if they are used to cover payroll expenses within the eight-week disaster window following the start of the loan. Businesses must also retain employees at salary levels comparable to compensation before the crisis.
If your business does not meet forgiveness criteria, then the funds will remain a traditional loan with a maximum interest rate of 4% and a 10-year repayment window. Loan fees or prepayment penalties will not be applied.
Thank you for reading through our SBA disaster loan FAQ. We hope you’re able to access the funds your business needs.
However, being approved for an SBA disaster loan is just the first step. You will need to track your expenses so that you can prove loan forgiveness eligibility. Together, we will make it through this unprecedented crisis.
Talk to one of our accounting experts, and let us set you up for success.
Call us at (740) 373-0056 or contact us online.