COVID-19 Relief Law
Our firm is providing the latest Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) relief for small to medium sized business owners during the COVID-19 pandemic.
As of March 30, 2020, the federal government instituted two programs to provide direct relief loans to small businesses impacted, specifically Economic Injury Disaster Loan Program ("EIDL") and Paycheck Protection Program ("PPP").
Economic Injury Disaster Loan Program ("EIDL")
The EIDL is available now and there is a simple online application. Both the $10,000 grant and the loan itself are deposited directly into your business bank account.
The SBA is providing a $10,000 grant to applicants, that does not need to be paid back, regardless of whether or not applicants qualify or ultimately take out the EIDL loan itself. You can apply for this loan now as a "bridge" and take advantage of a $10,000 grant (first come, first served) while they last. Later, if you receive a PPP loan and/or don't need this additional financing, you can simply choose not to take out the loan. The only drawback is that the EIDL funding may reduce the amount available under the PPP program, which is forgivable. The loans are for a maximum term of up to 30 years and have a fixed interest rate determined by a formula, with a maximum of 3.75% per year.
Paycheck Protection Program ("PPP")
The PPP loan should be available by the end of the week through your current bank. The loan is unsecured with no personal guarantee required. Additionally, PPP loans are forgiven if used for allowable expenses (payroll/overhead).
PPP eligible applicants in business since February 15, 2019, may obtain loans up to a maximum loan amount that is the lesser of:
- Two times your average total monthly payroll; or
Additionally, the PPP contains loan forgiveness provisions, under which the SBA will forgive loans made under the program by remitting the forgiven amount to the applicable lender.
Which Program (EIDL or PPP) is Right for Me?
Businesses should carefully review their operating costs when choosing between the two programs. While funds under the PPP may be used for things other than payroll, the program is primarily intended for businesses to keep their workers employed, as the maximum loan amount available under PPP is directly tied to payroll costs and employer-provided healthcare. Every business is different and if your labor/payroll costs are not a significant portion of your overhead, you may prefer the EIDL which is tied to gross revenues rather than the PPP which is determined by a factor of 2.5 times payroll -- the EIDL may get you more money. Which is all the more reason to contact us to get an application in now, before the money is all earmarked! There is no obligation to take the loan if offered. Conversely, if your business has a large payroll, you may want to skip the EIDL and take advantage of the "loan forgiveness" offered under the PPP program. Another factor to consider is the repayment for each program: an EIDL is repayable over 30 years and has a slightly lower maximum interest rate, while the unforgiven portion of a loan under the PPP is repayable over 10 years.
How Do I Apply For This Relief?
As described above, the CARES Act contains multiple means of relief for businesses and self-employed individuals. We understand how uncertain this time and our firm is prepared to advise you on which program is best suited for your financial situation as well as assist you in the application process for the two programs, Fazzio Law is in your corner.
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