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About two dozen local small business owners and others logged onto a Zoom meeting Wednesday to learn about loans and other assistance programs available to help them stay afloat during the COVID-19 crisis.

The video meeting was hosted by Tasha Brown, associate director of the Women’s Business Development Center, South Suburbs, which is a division of the Illinois Small Business Development Center.

During the meeting, Brown briefed business owners on the Coronavirus Aid, Relief, and Economic Security (CARES) Act recently passed by the U.S. Senate, and how its provisions might help them to sustain during the COVID-19 shutdown.

The CARES Act contains several provisions potentially benefiting local small businesses. Before borrowing, however, small businesses must consider their individual situation and discuss their decision with an accountant, if possible.

The Small Business Debt Relief program: For businesses with an existing SBA loan and new borrowers who take out an SBA loan over the next six months, SBA will cover all loan payments for six months, including principal, interest and fees. 

Paycheck Protection Program and Loan Forgiveness

This major provision of the CARES Act provides $350 billion to create a new type of SBA loan for certain entities in need.

Entities that are eligible to apply include:

  • Small businesses with fewer than 500 employees
  • 501(c)3 organizations with fewer than 500 employees 
  • Independent contractors
  • Sole proprietors
  • Self-employed people
  • Franchise locations and some corporate branches with fewer than 500 employees

These SBA-guaranteed Paycheck Protection Program (PPP) loans carry a 4 percent interest rate, and businesses can borrow up to $10 million, or 2.5 times their average monthly payroll, based on the previous year.

Secured through a growing number of approved private lenders, PPP loans can be used to cover certain business expenses, including:

  • Mortgage interest 
  • Rent 
  • Utilities
  • Payroll 
  • Group health care
  • Additional wages for tipped employees
  • Other debt incurred before Feb. 15, 2020

“When you sit down with one of these lenders, have this information in front of you,” Brown advised business owners. “Have knowledge of your payroll numbers, what your mortgage or rent is, your utility bills.”

All fees are waived for PPP loans; there are no collateral requirements; and credit review is lessened. Lenders also have “delegated authority” to approve PPP loans, meaning applications do not need to be reviewed by SBA before approval.

Loan Forgiveness: Businesses that continue paying employees during the eight-week term of their loan may request that the full amount of their loan be forgiven. Part of the intention behind the Loan Forgiveness Program is to provide flexibility for employers to re-hire or re-activate laid-off or furloughed workers.

Economic Injury Disaster Loan

The SBA offers the Economic Injury Disaster Loan (EIDL) program for businesses that are affected by all types of disasters. The CARES Act adds provisions to the EIDL loan program that offers benefits to the same group of entities eligible for PPP loans.

The provisions make available:

  • EIDL loans with 30-year terms, an annual interest of less than 4 percent, and no payments required for 12 months
  • Up to $10,000 as an advance for any eligible entity, even if it is eventually denied an EIDL loan
  • The ability to transfer a $10,000 EIDL advance into a Paycheck Protection Program loan if the business chooses to and is approved for a PPP loan. Then the borrower may request Loan Forgiveness for the PPP loan, effectively forgiving the EIDL advance.

Business owners may apply for both a PPP loan and an EIDL loan, while also requesting an EIDL advance. However, Brown said, the individual loan funds cannot be used to pay for the same expenses. If a borrower uses PPP loan funds to cover payroll, for example, she may not also use EIDL loan funds to cover payroll.

The eight-week PPP loans can be transferred into the longer-term EIDL loans, assuming the borrower did not already have their PPP loan forgiven.

Get more information and tips for employers here: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

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