On March 27th, the President signed a $2 trillion relief package called the Cares Act. It provides increased unemployment insurance payment and coverage, stimulus checks for individuals, aid to hospitals, tax credit for businesses retaining payroll despite losses, bailouts for certain industries, and funds for federal, state and local agencies.
On April 23rd, the President signed an additional $484 billion relief bill that put additional funding towards the Paycheck Protection Program, EIDL and Loan Advance, all of which ran out of money in just two weeks.
**Sixty billion dollars of Paycheck Protection Program funding will go to small lenders (less than $10 billion in assets) and community banks. This list shows SBA Lenders by size.
Paycheck Protection Program Loans that are distributed through SBA lenders. The program provides cash-flow assistance through 100% guaranteed loans to business and 501(c)3 employers who maintain their payroll during the covid-19 crisis. Businesses, non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees.
- Low interest rate – 0.5% to 1%
- Short loan terms – 2-year maturity
- Zero closing fees
- No personal guarantees and no collateral
- No loan payments for 6 months
- Loan amounts up to $10 million
- The SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. The program will be available retroactive from February 15, 2020, so employers can rehire their recently laid-off employees through December 31, 2020.
Apply through a local SBA lenders by August 8, 2020.
PPP Flexibility Act
On June 5, the president signed the PPP Flexibility Act, which gives borrowers more freedom in how and when loan funds are spent while retaining the possibility of full forgiveness.
Key changes to the original Paycheck Protection Program:
- Borrowers now have 24 weeks to spend loan proceeds, up from 8 weeks.
- The Act also reduces mandatory payroll spending from 75% to 60%.
- Two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce.
- Time to pay off the loan has been extended to five years from the original two.
- The Act now lets businesses delay paying payroll taxes even if they took a PPP loan.
PPP loan forgiveness
We suggest you currently refrain from applying for forgiveness, even though some (but not all) banks are processing applications. While the Small Business Administration (SBA) recently announced it can accept applications for loan forgiveness, the U.S. Congress is considering changes to the forgiveness process. The proposed legislation being deliberated by Congress may change loan forgiveness procedures and the application process.
Massachusetts Equitable PPP Access Initiative – Organizations that do not have a banking relationship with an SBA Lender can apply through this initiative. Berkshire Bank, BayCoast Bank, Eastern Bank, Reading Coop Bank, Leader Bank and several CDFIs will be processing PPP applications for non-customer businesses that meet the following criteria:
- You are a minority-owned business, sole proprietor or independent contractor operating in Massachusetts
- You have not previously applied for the PPP, or you applied and received notification from your bank that you were not approved in the first PPP round.
- You do not have a banking relationship with an SBA PPP lender.
The SBA Economic Injury Disaster Loan (EIDL) Program – Small businesses, private non-profit organizations of any size and cooperatives can apply for this loan. These funds can be used as working capital to help organizations make payments—payroll, rent, debt service payments—that they would have made had the crisis not occurred.
- Low interest – 3.75% interest rate for for-profit businesses and 2.75% rate for nonprofits
- Long loan terms – up to 30 years
- 12 month payment deferral (although interest accrues)
- Expedited loans for under $500k & don’t have to upload tax returns (private nonprofits must submit tax returns)
- Approximately one month processing time
- Up to $2 million
The Economic Injury Disaster Loan Advance is a Loan Advance of $10,000 that is available to applicants who have been approved for an Economic Injury Disaster Loan; it does not need to be repaid, so the Advance is a grant for business expenses. Apply here.
The SBA also announced Express Bridge Loans that provide up to $25,000 in emergency financing for disaster-related purposes. A business must have an existing relationship with the lender, either from a current loan or if the business is awaiting longer-term financing from the EIDL program.
The SBA is also offering Debt Relief to small businesses. Under this relief, the SBA will pay the principal and interest for six months beginning March 27th, 2020 for qualifying new and current holders of 7(a) loans. Businesses who already have a covered 7(a) SBA loan or receive a 7(a) SBA loan prior to September 27, 2020 would qualify. Discuss with your SBA lender.
The SBA has established a toll-free line to answer questions at 1-800-659-2955 Monday to Saturday 8am to 8pm.
#COVID Capital Relief created by the CASE Center at Duke University is a searchable national database of grants, loans and other cash equivalents for entrepreneurs, nonprofits, and businesses.
The IRS has extended the federal tax filing deadline to July 15, 2020. The MA State tax filing deadline has also been extended to July 15, 2020.
Most utility companies are waiving late fees and will not terminate service for inability to pay their bills on time. Check with your individual providers for more information.
Most banks and credit card companies are waiving late fees are deferring payments. Call your financial institutions for more information.