Written by Kayla White (News Writer)
Due to the impact of COVID-19, small businesses are having a difficult time trying to make enough money to stay in afloat, financially. Many of these businesses are being forced to close because they’re “non-essential”, and the businesses that are still open are only making a fraction of their usual income. Since small businesses are not making their usual income, loans specifically made for small businesses have been created to combat the economic devastation.
The Small Business Administration has funded many temporary programs that can help small businesses from the COVID-19 breakout. Some of the programs are the EIDL Loan Advance, SBN Express Bridge Loan, and the SBA Debt Relief. The EIDL Loan Advance can provide up to $10,000 of economic relief to the businesses that are having difficulties. The SBA Express Bridge Loan allows the small businesses that already have a relationship with an SBA Express Lender to get up to $25,000. And the SBA Debt Relief program, which provides a financial reprieve to small businesses due to the pandemic.
A new federal loan program has been created called the Paycheck Protection Program, or the PPP, that allows qualified banks to offer low-interest loans that can be forgiven later. However, the Paycheck Protection Program excludes any sick or family leaves. The new loans will be able to cover the payroll costs in which 75% of the loan must go to, employee benefits, mortgage interest, and utilities. The payroll costs cover the salary wages, benefits for vacation, medical leave, or sick leave. The Paycheck Protection Program can provide up to $10 million dollars to cover payroll and other expenses.
For a small business to be eligible to apply for a PPP loan they have to meet certain requirements. Small businesses can apply for a PPP loan if they have 500 or less employees, if they are defined as a “small business” by the SBA, with maximum tangible net worth up to $15 million, has a sole proprietor, or has an independent contractor, or are self-employed. Small businesses can borrow up to two and a half times the borrower’s average monthly payroll costs. The payroll costs can be calculated by simply taking the sum of included payroll costs and subtracting them from the sum of excluded payroll costs. The Included payroll cost for proprietors, independent contractors, or self-employed individuals is the net income not more than $100,000 in one year. The excluded can be the compensation of an individual employee in excess of an annual salary of $10,000. A borrower is eligible for loan forgiveness equal to the amount the borrower spent on payroll costs, interest on the mortgage, rent and utility payments, or interest on other debt obligations. The amount of loan forgiveness can be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.