Calling all CEO’s, promotional product proprietors, shop owners and fearless entrepreneurs, the Small Business Administration has launched a program to help overcome the challenges created by this health crisis. They offer multiple funding options and loan forgiveness for those seeking relief.
Our industry is facing an unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak. On Friday, March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES), which contains $376 billion in relief for American workers and small businesses.
“These loans will bring immediate economic relief and eight weeks of financial certainty to millions of small businesses and their employees,” says SBA Administrator Jovita Carranza. “We urge every struggling small business to take advantage of this unprecedented federal resource—their viability is critically important to their employees, their community and the country.”
What to know about SBA’s emergency program:
- Total Budget: $376 billion
- Loan Cap: $10 million
- Guarantee Rate: 100%
- Eligibility: Firms with 500 or fewer workers
- No personal guarantee or collateral required
- Interest rate 1%
In addition to traditional SBA funding programs, the CARES Act established several new temporary programs to address the COVID-19 outbreak.
The loans are available to cover up to eight weeks of average monthly payroll (based on 2019 figures) plus 25% and payments are deferred for six months (interest does accrue). The SBA will forgive the portion of loan proceeds used for payroll costs and other designated operating expenses for up to eight weeks, provided at least 75% of loan proceeds are used for payroll costs. Eligible expenses for the eight-week forgiveness include:
- Payroll costs (excluding the prorated portion of any compensation above $100,000 per year for any person. Payroll costs include salary, commissions, tips; certain employee benefits including sick leave and health care premiums, and state and local taxes;
- Mortgage interest (not prepayment or principal payments) and rent payments on mortgages and leases in existence after February 15, 2020;
- Utilities such as electricity, gas, water, transportation, phone and internet access for services that began before February 15, 2020; and
- Additional wages paid to tipped employees.
Look out for Scam and Fraud
The Small Business Administration Office of Inspector General (SBA OIG) sent out a notice regarding numerous fraud, scam, and phishing messages targeting small business owners.
Scam and Fraud Scheme Advisory List
- SBA does not initiate contact on either 7a or Disaster loans. If you are proactively contacted by someone claiming to be from the SBA, suspect fraud.
- If you are contacted by someone promising to get approval of an SBA loan, but requires any payment up front or offers a high interest bridge loan in the interim, suspect fraud.
- Look out for phishing attacks/scams utilizing the SBA logo. These may be attempts to obtain your personally identifiable information (PII),to obtain personal banking access, or to install ransomware/malware on your computer.
- If you are in the process of applying for an SBA loan and receive email correspondence asking for PII, ensure that the referenced application number is consistent with the actual application number.
- SBA limits the fees a broker can charge a borrower to 3% for loans $50,000 or less and 2% for loans $50,000 to $1,000,000 with an additional ¼% on amounts over $1,000,000. Any attempt to charge more than these fees is inappropriate.
- Any email communication from SBA will come from accounts ending with gov.
- The presence of an SBA logo on a webpage does not guaranty the information is accurate or endorsed by SBA. Please cross-reference any information you receive with information available at sba.gov.
- If you have a question about getting a SBA disaster loan, call 800-659-2955 or send an email to firstname.lastname@example.org.
- If you have questions about other SBA lending products, call SBA’s Answer Desk at 800-827-5722 or send an email to email@example.com.
Visit http://www.sba.gov/Coronavirus for additional resources about protecting your business, employees and customers.