Federal Assistance for Small Businesses During Coronavirus | Congressman Lee Zeldin

Federal Assistance for Small Businesses During Coronavirus

Paycheck Protection Program

All loans under this program will have the following identical features:

  • Interest rate of 1%

  • Maturity of 2 years

  • Loan payments deferred for 6 months

  • 100% guarantee by SBA

  • No prepayment penalties or fees

  • No collateral

  • No personal guarantee requirement

  • No borrower or lender fees payable to SBA

This loan can be used for: 

  • Payroll costs, including benefits;  

  • Interest on mortgage obligations, incurred before February 15, 2020;  

  • Rent, under lease agreements in force before February 15, 2020; 

  • Utilities, for which service began before February 15, 2020;

  • Certain operations expenditures including payment for any software, cloud computing, and other human resources and accounting needs;

  • Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance;

  • Expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan;

  • Worker protection expenditures including personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.

First Draw Loan Details

The portal is currently accepting First Draw PPP loan applications from participating Community Financial Institutions (CFIs), which include Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs) and Microloan Intermediaries. A First Draw PPP loan is for those borrowers who have yet to receive a PPP loan before the program closed in August 2020.

SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.

  • PPP loans have an interest rate of 1%.

  • Loans issued prior to June 5, 2020 have a maturity of two years. Loans issued after June 5, 2020 have a maturity of five years.

  • Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower's loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either 8 weeks or 24 weeks).

  • No collateral or personal guarantees are required.

  • Neither the government nor lenders will charge small businesses any fees.

Who qualifies for a First Draw Loan?

The following entities affected by coronavirus (COVID-19) may be eligible:

  • Sole proprietors, independent contractors, and self-employed persons;

  • Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard);

  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:

    • 500 employees, or

    • That meets the SBA industry size standard if more than 500;

  • Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location;

  • Chambers of Commerce and Destination Marketing Organizations that are organized as 501(c)(6)s are now eligible to participate in the program as long as the entity does not receive more than 15% of receipts or $1,000,000 in revenue from lobbying and has 300 or less employees.

Second Draw Loan Details

Participating CFIs have begun submitting application information to SBA for Second Draw PPP loans. A Second Draw PPP loan is for certain eligible borrowers that previously received a PPP loan, generally have 300 employees or less, and have suffered a 25% reduction in gross receipts. At least $15 billion is set aside for additional PPP lending by CFIs.

Second Draw PPP Loans carry the same general loan terms as the First Draw PPP Loan. Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

Who qualifies for a Second Draw Loan?

A borrower is generally eligible for a Second Draw PPP Loan if the borrower: 

  • Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
  • Has no more than 300 employees; and
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

On January 19th, all lenders will be able to submit First and Second Draw PPP loan applications. SBA will continue to provide updates on systems operations, and, additionally, SBA will dedicate specific times to process and assist the smallest PPP lenders with loan applications from eligible small businesses. 

For most borrowers, the maximum loan amount of a Second Draw PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (click HERE for NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP Loan is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million. 

 

Applying for Paycheck Protection Program

The SBA is currently accepting Paycheck Protection Program PPP loan applications from participating community financial institutions (CFIs) and lenders which includes approximately 5,000 institutions, including community banks, credit unions, and farm credit institutions. Lender Match can help you find a participating lender. 

Starting on January 19, you can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. 

Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. 

To apply for a Paycheck Protection Program Loan, you will need to fill out the application here.

 

Paycheck Protection Program FAQs

Q: Do I qualify for the Paycheck Protection Program? 

A: Businesses, 501(c)(3)s, and 501(c)(19)s (veterans’ organizations) with less than 500 employees will be eligible for this loan. Chambers of Commerce and Destination Marketing Organizations that are organized as 501(c)(6)s are now eligible to participate in the program as long as the entity does not receive more than 15 percent of receipts or $1,000,000 in revenue from lobbying and has 300 or fewer employees. 

Additionally, sole proprietors, independent contractors and self-employed individuals will also be eligible. Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. If your franchisor appears in the SBA’s National Franchise Directory, assistance will extend down to the franchise of the store or location level. In addition, if you are a restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible.

Q: Are nonprofits, churches, Chambers of Commerce and physician practices eligible? 

A: Nonprofits and churches designated as a 501(c)(3) may participate in the Paycheck Protection Program. Physician practices are eligible, regardless of how they are structured. Chambers of Commerce and Destination Marketing Organizations that are organized as 501(c)(6)s are now eligible to participate in the program as long as the entity does not receive more than 15 percent of receipts or $1,000,000 in revenue from lobbying and have 300 or less employees. 

Q: Can I receive both an Economic Injury Disaster Loan and a Paycheck Protection loan? 

A: Businesses will be able to receive both as long as they go towards different things. For example, a business can receive an Economic Injury Disaster Loan for working capital and a Paycheck Protection loan for payroll assistance.

Q: What counts as payroll costs? 

A: Payroll costs include:  

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee); 

  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;  

  • State and local taxes assessed on compensation;

  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

Q: How much of my loan will be forgiven? 

A: You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll:  

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.  

  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.  

  • Rehiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020. 

Q: How can I request loan forgiveness? 

A: You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.

Q: Do I need to pledge any collateral for these loans? 

A: No. No collateral is required. 

Q: Do I need to personally guarantee this loan? 

A: No. There is no personal guarantee requirement.

Q: Can I deduct expenses paid with PPP proceeds from my annual taxes?

A. Yes. Deductions are allowed for otherwise deductible expenses paid with the proceeds of a PPP loan that is forgiven, and that the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the loan forgiveness.

 

Economic Injury Disaster Loans

On March 19, 2020, the United States Small Business Administration (SBA) issued an emergency declaration making Economic Injury Disaster Loans available to small businesses and private, non-profit organizations in the State of New York, including Suffolk County. 

Economic Injury Disaster Loans provide small businesses with working capital loans of up to $2 million to help overcome the temporary loss of revenue. 

The loans may be used to pay fixed debts, payroll, accounts payable, or other bills that can’t be paid because of the COVID-19 outbreak. 

The interest rate is 3.75% for small businesses without credit available elsewhere, and 2.75% for non-profit organizations. 

The maximum term is 30 years.
 

Economic Injury Disaster Loan FAQs

Q: Do I qualify for an Economic Injury Disaster Loan?

A: Small businesses, small agricultural cooperative and most private nonprofit organizations qualify for an Economic Injury Disaster Loan. 

Q: What are the credit requirements? 

A: Acceptable credit history, proven ability to repay the loan, collateral for loans over $25,000. 

Q: Does the SBA require collateral? 

A: Economic Injury Disaster Loans over $25,000 require collateral. The SBA takes real estate as collateral when it is available. The SBA will not decline a loan for lack of collateral, but requires borrowers to pledge what is available. 

Q: How long will it take me to receive approval?

A: Once a borrower submits an application, approval timelines depend on volume. Typical timeline for approval is 2-3 weeks and disbursement can take up to 5 days. Borrowers are assigned individual loan officers for servicing of the loan. 

Q: I have an existing SBA loan. Do I still qualify for a disaster loan?

A: Applicants can have an existing SBA loan or other SBA loan and still qualify for this disaster loan. Loans cannot be consolidated.

Q: Where can I find more information? 

A: For additional information, you can contact the SBA Disaster Assistance customer service center, by calling 1-800-659-2955 or emailing disastercustomerservice@sba.gov.   

 

For more information, visit SBA.gov/coronavirus.