SBA Initiatives Continue to Help Small Businesses in Need of Financial Assistance

Economic Injury Disaster Loan Program Reopens, PPP Rules Revised, and Loan Forgiveness Applications Available

As the talk in the media has shifted from lockdown to reopening in the last two weeks, and the risks that many still see to public health and the economy, there is one definite bright spot that the recent retail sales beat (17.7% vs. 8% estimate) highlights. I’m talking about the success of numerous Small Business Administration (SBA) lending initiatives aimed at supporting America’s small businesses.

To meet the needs of small businesses and non-profits struggling due to COVID-19, the SBA has reopened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program portal to all eligible applicants experiencing serious economic damages because of the pandemic. These loans, issued directly by the SBA, may be used to pay debts, payroll, accounts payable and other bills that cannot be paid because of the disaster’s impact, and that are not already covered by a Paycheck Protection Program (PPP) loan. 

The reopening of the EIDL assistance and EIDL Advance application portal enables small businesses and non-profits to receive long-term, low interest loans and emergency grants that will reduce the economic impacts on companies, employees, and communities they support. EIDL funding can be used to cover payroll and inventory, pay debt or other expenses. 

The interest rate is 3.75% for small businesses, while the interest rate for non-profits is 2.75%. To keep payments affordable for small businesses, SBA offers loans with long repayment terms, up to a maximum of 30 years. Plus, the first payment is deferred for one year.

Additionally, the EIDL Advance program provides up to $10,000 ($1,000 per employee) of emergency economic relief to businesses that are currently experiencing temporary difficulties. These emergency grants do not have to be repaid.

New Loan Forgiveness Application

The SBA and the Treasury Department have posted a revised, user-friendly PPP loan forgiveness application implementing the PPP Flexibility Act of 2020. In addition to revising the full forgiveness application, the SBA also published a new “EZ” version of the forgiveness application applicable to borrowers who:

• Are self-employed and have no employees; OR
• Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
• Experienced reductions in business activity because of health directives related to COVID-19 and did not reduce the r wages of employees by more than 25%.

The EZ application requires fewer calculations and less documentation, which makes the process much less intimidating. This will go a long way toward improving access and ensuring many of the businesses that are most in need right now will be able to have their loans forgiven rather than carried forward as future debt.

Revised Guidance Regarding the Paycheck Protection Program

In consultation with the Treasury Department, the SBA issued new and revised guidance for the Paycheck Protection Program (PPP). The Paycheck Protection Program Flexibility Act (PPPFA), signed into law by President Trump on June 5, updates provisions relating to loan maturity, deferral of loan payments, and forgiveness provisions. Many of the rule changes will help the SBA distribute the remaining PPP appropriations to support small business owners and their employees.

The eligibility threshold for those with felony criminal histories has been changed. The look-back period has been reduced from 5 years to 1 year to determine eligibility for applicants, or owners of applicants, who, for non-financial felonies, have been convicted, pleaded guilty or nolo contendere, or been placed on any form of parole. (The period remains 5 years for felonies involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance.) 

The SBA has worked to provide the greatest amount of emergency economic relief possible, according to SBA Administrator Jovita Carranza. To meet the unprecedented need caused by the coronavirus, the agency has made numerous improvements to the application and loan closing process.

I have long maintained that the SBA is perhaps the federal government’s best performing agency. While the PPP program undoubtedly had a rocky start, it indeed provided a lifeline to small business owners who might not have otherwise been able to survive. The agency was willing to take unprecedented risks, such as letting fintech players like Biz2Credit provide PPP funding and quickly get money into the hands of small businesses that were on the brink of collapse. This has been a time that the SBA and Treasury Department have really shined.

These successes will shine even more if the combined efforts can facilitate the distribution of the over $100 billion in appropriations left to be provided to small businesses still in the PPP. Only ten days remain, so hopefully all those business owners who have been hesitant up till now to take advantage of the great work these agencies are doing will take the opportunity to apply.