SBA Loan – EIDL Program

The U.S. Small Business Administration (SBA) is currently offering low-interest disaster loans for working capital to small businesses (fewer than 500 employees) and nonprofits in designated states and territories suffering substantial economic injury due to the current pandemic. Loans can be used to help meet the organization’s obligations and to pay what would have been its ordinary and necessary operating expenses had the disaster not occurred. Applications can be completed at https://disasterloan.sba.gov/ela/. SBA’s Economic Injury Disaster Loans (EIDL) offer up to $2 million in assistance with an interest rate of 3.75% for small businesses and 2.75% for non-profits with terms up to 30 years. Terms are determined on a case-by-case basis based upon the borrower’s ability to repay.

SBA Loan – AKA: Paycheck Protection Loans

As part of the CARES Act recently signed by President Trump, the SBA will have an additional loan program that has the potential to be partially forgiven. A small business with fewer than 500 employees could apply for a loan up to $10 million with an interest rate no higher than 4% over a ten-year term. Actual loan amounts granted will equal two and a half months of an individual’s payroll costs based on the 12 months prior to the loan origination date. Borrower, lender, and prepayment fees would be waived as well as collateral and personal guarantee requirements. The forgivable portion of the loan would be 8 weeks of certain operating expenses. Forgiveness starts after the origination date of the loan covering things like payroll costs, interest payments, rent/leases payments, and utility payments. The costs forgiven had to be present prior to February 15, 2020 (i.e. Someone can’t enter into a new lease today and have loan forgiveness on it). The forgivable amount may be reduced if a business reduces its employee count as compared to what it was in 2019 or employee compensation drops by more than 25% compared to the prior year. Eligible payroll costs do not include compensation above $100,000 in wages, payroll taxes, compensation for employees with residence outside of the U.S, and any sick or family leave as part of the recent Families First Coronavirus Response Act. Cancelled indebtedness (forgiveness) will not be included in the borrower’s taxable income.

Pennsylvania Industrial Development Authority (PIDA) Working Capital Loan

This is a state program with more than $60 million dollars in funds allocated for loans to small businesses with fewer than 100 full-time employees. Loans are available up to $100,000 to help small businesses overcome the temporary loss of revenue as a result of the current pandemic. Applicants will need to verify that over the past 3 months they have spent an amount equal to their loan request on direct business expenses (payroll, utilities, rent, debt payments, inventory, etc.) up to the maximum $100,000 loan amount. Retail and certain service-based businesses will need to verify they spent at least $200,000 on direct business expenses to maximize the $100,000 loan amount. This loan has a 3-year term and 12-year amortization with no payments due for the initial 12 months. The interest rate is set at 0.00% fixed for businesses and 2.00% fixed for production agriculture. Personal or corporate guarantees are required for all 20% or greater business owners. Two key points to keep in mind for this program is that funding is limited and it is a loan requiring repayment, albeit one with very favorable terms.