Small businesses are scrambling to take advantage of the financial resources available to them, us included. It’s difficult to keep up with the different options, and to make it even more complicated, the rules seem to be changing every day, and the lenders are trying to get everything sorted, so that they can help us. Here is a collection of the options available to business owners in Florida. We have personally applied for a few of these options ourselves, so we have included commentary on our experience as well.
Paycheck Protection Program (PPP)
Loans can be up to 2.5x the borrower's average monthly payroll costs of the previous 12 months, not to exceed $10 million. The loan amount will be forgiven if used within 8 weeks for the following costs: payroll (including health care), mortgage or rent and utility payments. If done correctly, your entire loan amount can be transferred into a grant.
For more info about eligibility and loan details, CLICK HERE.
BOOKKEEPING TIP: Create new accounts in your General Ledger such as "PPP payroll," "PPP mortgage" and "PPP utilities" so that you can easily prove that these payments can be applied to the forgiveness amount. Be sure to use these accounts when you pay for the applicable expenses.
How to apply? The Payroll Protection loans, which are backed by the SBA, are available from private lenders such as your local bank. Check with your local bank to determine how to apply.
Many banks are having a hard time developing the application process for this loan, and they unfortunately haven’t had a lot of time or specific directions from the SBA as to how everything will work. It appears that most lenders are doing the best they can to service their customers. We’ve heard from several lenders on the PPP, and they are saying that you have to apply through the bank that you do your business banking with. So, we applied for ours last week with Chase Bank. They finally called yesterday to finish processing our application, so we are relieved that we’ve got ours in. There is a limited amount of money that is available through this program, so getting your application in sooner rather than later is a good idea.
Can’t Get A PPP Through Your Bank?
Some banks have already cut off new applications, such as Wells Fargo (they did open applications back up again apparently), so what can business owners do who can’t apply through their own bank? We found a national, non-bank, small business lender, approved by the SBA, that is aggressively trying to help small business owners to take advantage of the opportunity. The link will take you to more information and a portal for making an online application directly with the lender. Click HERE for information on the program and to apply online. This lender does not require you to be a current customer or a current borrower from them.
Also, Newtek, a small business finance specialist is lending to non-customers as well. Click HERE to visit their webpage.
(Please note: we cannot personally recommend these lenders, as we have no working relationship with them; however, they were recommended to us by a fellow lender, looking to help).
How Long Will It Take To Get Funds?
The million dollar question is WHEN will we be getting these loans to help us keep our employees paid and our lights on? According to my bank, JP Morgan Chase, they really have no idea. We inquired about a possible timeline yesterday when Chase called me to help me finalize our application. The representative noted that they have no way of knowing how quickly the SBA will approve these loans. There’s little information on loan disbursement timelines on the SBA’s PPP loan page, which is not a surprise, and the current news is primarily focused on banks being overwhelmed by current applications. Unfortunately, we think we are in a situation of “hurry up and wait.” Make sure you are prepared to apply...have your payroll expenses calculated for the 12 month period of February 15, 2019-February 15, 2020, and be prepared to give them documents to support that number. Chase told us that the SBA just wants to see that the amount you have applied for has supporting evidence. We submitted a P&L for February 15, 2019-February 15, 2020 (that’s what Chase suggested), as well as our 2019 940 tax form. We had to fill out 2 different applications, one from the SBA and another that was called “Additional Information.” We were told that our interest rate would be 1%. Since we will use every penny of that loan on our payroll expenses for the next 8 weeks, and so as long as we document that, we can apply for the grant to have it all forgiven...hopefully.
SBA 7a Loan Deferment
We have HEARD from several lenders, but actual language from the SBA on this is hard to find that anyone with a current SBA 7a Loan or is given a new SBA 7a loan before June 31, 2020 will receive 6 months of deferment with no payments needed on principal or interest. Apparently, starting no later than 30 days after the date on which the first payment is due, the SBA will pay all principal, interest, and fees on existing SBA loans for 6 months pursuant to 7(a), Community Advantage, 504, and Microloan programs. If the loan is currently in deferment, then the SBA will begin making payments after the deferment period. Borrowers who obtain new loans under those programs within six months after the enactment of the CARES Act are also entitled to have the SBA make a full 6 months of loan payments. These provisions of the CARES Act do not apply to loans under the new Paycheck Protection Program. The SBA is directed to promulgate implementing regulations within 15 days of enactment of the CARES Act.
If you have a 7a SBA loan or are thinking of getting one (most of our customers have gotten SBA loans to acquire an existing business) get in touch with your loan servicer or lender to find out the details of applying for a deferment and what the details are.
State of Florida Disaster Bridge Loans
Look into the bridge loans that the government is currently offering. These are offered by the State of Florida and are short-term, interest-free working capital loans intended to "bridge the gap" between the time a major catastrophe hits and when a business has secured longer term recovery resources, such as sufficient profits from a revived business, receipt of payments on insurance claims or federal disaster assistance. https://floridadisasterloan.org/
SBA Economic Injury Disaster Loans (EIDL)
The Small Business Administration (SBA) Economic Injury Disaster Loans are working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a result of the disaster. These fixed interest rate loans, with terms up to a maximum of 30 years, are intended to assist through the disaster recovery period. Applicants can apply online, receive additional disaster assistance information and download applications by clicking here. Here is a one-page fact sheet on these loans to help you better understand how they work and whether they're right for your business.
EIDLs smaller than $200,000 can be approved without a personal guarantee. The expanded EIDL loan program also offers up to a $10,000 emergency cash advance that may not need to be paid back and which they advertised you can receive within 3 days of applying. EIDLs are loans of up to $2 million that carry interest rates up to 3.75% for companies and principal and interest deferment for up to 4 years. The $10K EIDL grant does not need to be repaid, even if the grantee is subsequently denied an EIDL. This grant may be used to provide paid sick leave to employees, maintain payroll, or pay debts, rent and mortgage payments. The SBA has clarified that they are only giving an advance of $1,000 PER EMPLOYEE (as of January 31, 2020), up to $10,000. There was a big misconception that everyone who applied would get $10,000.
***Eligible grant recipients must have been in operation on January 31, 2020. The grant is available to small businesses, sole proprietors and independent contractors.
How to apply? These loans are applied directly through the SBA. To use their expedited, incredibly easy and fast application process CLICK HERE.
A business that receives an EIDL between January 31, 2020, and June 30, 2020, is eligible to apply for a PPP loan, or the business may refinance their EIDL into a PPP loan. In either case, the emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven in the payroll protection plan.
We applied for this loan for our business over a week ago, and still have not heard anything back yet. We called the SBA’s Customer Service Center at (800) 659-2955 and got information from them that they are about 3 weeks behind in processing these and the $10k is not guaranteed. So, we aren’t sure when or if this will be an option for us.
By no means are we financial experts, so the information provided is for convenience only. We strongly suggest that you reach out to your bank, favorite lender or the SBA to get more information about any of these loans or programs, before making any financial decisions.