SBA Help for Small Businesses to Survive COVID – H.R. 748 : Part 1 of 2
By Debbie Gregory.
Did you know that the Small Business Administration (SBA) helps small businesses obtain the loans they need? The federal SBA provides a wealth of financial assistance, and other services to small businesses across the United States. Recently they have added quite a few new programs to help thanks to H.R. 748.
How does the SBA determine whether or not your business is considered a small business? The SBA determines whether you are a small business using either your revenue numbers or your employee headcount (the headcount varies by industry).
The main SBA program most business apply and qualify for is a loan guarantee program. The SBA may repay a portion of the amount borrowed by qualified businesses in cases when the small business borrower cannot repay the loan. Loan guarantees reduce the overall risk to the lender, thus enabling the small business to obtain more favorable terms, such as a lower interest rate or longer term.
The SBA also directly makes low-interest loans to businesses and nonprofit organizations following declared disasters. A disaster loan may be for either covering repairs and replacement of physical assets damaged in a disaster or covering small business operating expenses after a disaster.
What is new? H.R. 748 is!
In general terms, H.R. 748 provides $349 billion dollars for forgivable small business loans. This program is called the Paycheck Protection Program (PPP) and was designed to subsidize small businesses so that they can continue to pay their employees and overhead costs while their revenues have been reduced due to the COVID-19 pandemic.
Unlike a typical SBA loan, businesses will not be required to repay these loans if the money is used exclusively to pay:
- Employee wages
- Employee benefits
- Mortgage or rent for the business’s location
- Utility bills for the business’s location
Instead, the loans will be forgiven after eight weeks. The business is required to clearly document how the money was used to ensure adherence to the loan program’s rules. If the business has not properly documented spending the loan money, or spent the money on other things, they will be required to pay all of it back in full at an interest rate of four percent (4%).
Is $349 Billion Enough to go Around?
The program has enough to provide every eligible employer a forgivable loan for up to 2.5 months of payroll. With this said many are receiving so much more including businesses that you might not characterize as small businesses. For example, large public companies and major sports teams have received PPP funds and the the money has been depleted once already and refunded.
Who is Eligible for Assistance?
All businesses and nonprofit organizations with fewer than 500 employees are eligible. There are also a few businesses that will qualify even though they have more than 500 employees. For example, a business may have more than 500 employees per location. Some sole-proprietors and self-employed people are also eligible for relief. Loans are available on a first-come, first-served basis.
How Much Money can you Get?
You can qualify for about 2.5 times your average monthly payroll, or up to $10 million dollars. You do not even need to prove that you could potentially pay back the loan; instead, you simply need to prove that you have been running your business prior to February 15, 2020. This sometimes translates into the money going to businesses that don’t need it and there has been some widespread fraud.
Stay tuned for part 2 of this mini article series. Part 2 will provide information on other assistance programs that H.R. 748 provides. There are even a few programs designed for specific types of large corporations.
VAMBOA, the Veterans and Military Business Owners Association believes that small veteran and military business owners should benefit first. They made huge sacrifices for our nation. We are disheartened to see huge corporations receiving this money and the program running out.
If you are not already a member of VAMBOA, the Veterans and Military Business Owners Association, please consider joining. We do not charge dues or fees and members can use our seal on your collateral and web site. Here is a link to register to join: https://vamboa.org/member-registration/
