While the full Coronavirus stimulus bill has yet to be approved by the House of Representatives and signed by the President to become law, here are the details we can share with our business clients. We will update this information as soon as we learn anything new.
SBA Loan Programs
There are currently two SBA loan programs in effect to help small businesses continue to operate. The first is the Economic Injury Disaster Loan (EIDL) program that became available to all small business with the federal disaster declaration for the COVID-19 pandemic. The second is an $299B expansion of the SBA 7(a) loan program contained in the stimulus bill, referred to as a small business interruption loan (SBIL). You will not be able to get both loans to cover the same costs, and it appears SBIL will be the better option for most small businesses. Regardless, we recommend that you apply for both loans, if you there is any chance that your business will require operating funds to weather this crisis. There is no cost, if you don’t use the loan funds, even if you are approved. The loans will operate like credit lines.
The EIDL applications are available now on the SBA website, while details on the SBIL application process are expected to be published next week. However, all indications are that the 7(a) loans could be processed much faster, through most banks. Initial funding for SBILs may be available as quickly as three days after application. I would expect for the EIDL process to take 30 plus days to process.
The biggest reason I see SBIL as the better option is potential forgiveness of the loan, to the extent that it is used to meet payroll expenses between March 1 and June 30, 2020. You will have to apply for loan forgiveness, and submit documentation and good faith certification of the economic conditions that justify the forgiveness, but that should not be an issue for many of you who have essentially had to close down your operations. The payroll expenses eligible include sick leave payments under the Families First Coronavirus Response Act.
That is what we know so far. We will update this information regularly and recommend that you contact your business bank to let them know you are interested in the SBIL program.