April 25, 2020
New COVID-19 Relief for Small Businesses and Nonprofits
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April 25, 2020 (Washington, D.C.) -- On Friday, President Trump signed another bipartisan interim COVID-19 pandemic relief bill that will inject approximately $320 billion of new funds into the Paycheck Protection Program created by the original CARES Act
. This new money, expected to be made available beginning next week, will further allow small businesses and nonprofits (including gurdwaras) to apply for forgivable low interest rate loans. The bill also includes an additional $60 billion in new funds for Economic Injury Disaster Loans (EIDL).
This additional funding was passed because the previous PPP funding was exhausted, leaving many American small businesses and nonprofits without any financial assistance during the pandemic. Here is what you need to know about applying for this new federal funding.
PAYCHECK PROTECTION PROGRAM BASICS
The official deadline to apply for PPP is June 30, 2020, but due to high demand, funding will likely run out well before this time. Therefore, it is recommended that you prepare now to submit your request for this forgivable loan as soon as possible. Loans are processed on a first come, first serve basis. If you have previously applied for PPP and received a number from SBA E-Tran Servicing, you do not need to resubmit your loan, as it is ‘in line’ for review. Those who previously applied but have not received their loan funds or a number from the SBA E-Tran Servicing should contact their Small Business Banker to determine if the application has to be resubmitted. Alternatively, they can switch lenders (such as a credit union or community bank) and reapply.
Who Can Apply
To apply for PPP, a small business or nonprofit organization cannot be larger than 500 employees. They must also certify that current economic uncertainty resulting from COVID-19 makes the loan request necessary. PPP is available to nonprofits, business owners, self-employed workers, independent contractors, gig economy workers, and independently owned franchises and sole proprietors.
Nonprofits, including gudrwaras, are now eligible for SBA business loans for PPP. The nonprofit needs to meet all the requirements of an established 501(c)(3)
. Nonprofits are not required to apply for tax-exempt status with the IRS to become eligible for the PPP loan. Nonprofits are encouraged to apply for the maximum permissible loan amount as they cannot apply for a PPP loan more than once. To learn more about PPP availability for gurdwaras and other faith-based organizations, you can visit the Small Business Administration’s Frequently Asked Questions
Nonprofits should ensure that they meet all legal requirements under the law, their by-laws, and other governance documents. The nonprofit’s governing board, or executive committee, should approve the loan prior to submitting the application or prior to receipt of the loan funds. A nonprofit with existing loans or other financial commitments should examine the underlying documents to determine whether they contain covenants restricting or limiting the nonprofit’s ability to incur additional debt. If such covenants exist, third-party consent may be needed prior to obtaining a loan.
Preparing to Apply
Ensure that your business or gurdwara is prepared to apply, and check if your bank is accepting PPP loan applications.
Click here to learn if your bank is accepting PPP loan applications or is an SBA-approved lender.
If not, you will need to create an account with one of the participating banks. Some banks may impose other limitations on their loan-processing programs, such as only processing applications from customers with credit lines or only processing applications above a specific loan amount. Credit unions and community banks may be better situated to provide you with loan application assistance as larger banks are overwhelmed with requests.
While the PPP application is short, each bank will likely request additional information, and that information will vary from bank to bank. Banks will likely require copies of certain governance documents (e.g., certificate of incorporation and by-laws), tax returns and/or financial statements, and evidence of payroll (possibly including tax filings). Click here to see what the loan application requires to help you prepare the necessary documentation.
Loans are available for up to $10 million or 2.5 times the average monthly payroll (whichever is lower). The entirety of the loan could be forgiven if you follow the stated guidelines. Businesses cannot count payroll in limited circumstances for employees that earn a salary above $100,000 or live outside the United States.
The loan does not require providing any collateral or providing a personal guarantee. The loan lasts for 2 years with a fixed interest rate of 0.5 percent per year. Repayment of the principal, interests, and fees is deferred for at least 6 months (with interest continuing to accrue during deferral). Principal payments will be due in two years, and there is no prepayment penalty.
How will the loan be forgiven?
An application will need to be submitted to the lender, and a decision will be made within 60 days. Forgiveness is on the principal alone. PPP loans will be forgiven if used to cover payroll (including paid leave) for eight weeks and the money is used for rent, mortgage interest, utilities (gas, water, transportation, telephone, or internet access), health-insurance premiums, retirement benefits, and interests on other debt obligations.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. Also, forgiveness will cover non-payroll costs only to a maximum of 25 percent of the total loan to a recipient.
OTHER FUNDING OPPORTUNITIES
New funding will also allow businesses and nonprofits to apply for the EIDL on a first-come, first-serve basis for businesses currently experiencing a temporary loss in revenue. This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors, and self-employed persons) or private non-profit organization. Unlike PPP, this is a loan that will not be forgiven and would increase your organization’s debt.
The maximum loan amount is $2 million at a rate of 3.75 percent for businesses and 2.75 percent for nonprofits with a maximum of a 30-year term. Payments are deferred for one year, and up to $200,000 can be approved without a personal guarantee. Collateral is not required for loans of $25,000 or less. Click here to see a checklist of what is required to obtain an EIDL loan.
Advance funds of $10,000 will be made available for businesses with at least 10 employees within three days of application; smaller businesses will get $1,000 per employee. This advance fund will not need to be repaid. It is not necessary to have an approved EIDL loan to get the advance--however, if you are able to secure a PPP loan, the advance will be subtracted from the forgiveness amount.
State and Local Assistance
States and cities may also be providing additional financial assistance to businesses. Click here to learn if there are other loans, grants, or funds made available by your state.
If you need additional information about financial assistance available to your business or nonprofit, you can search for a local assistance partner
through the Small Business Administration. These partners can help guide you through federal, state, and local assistance programs.
The Sikh Coalition will continue to provide additional information and resources
as the federal government enacts additional assistance that can help individuals, businesses, and gurdwaras impacted by COVID-19.
As always, the Sikh Coalition urges you to practice your faith fearlessly.