CLARKSBURG, W.Va. — The U.S. Small Business Administration will begin offering loans to small businesses to help them pay their employees during this period of economic shutdown amid the coronavirus pandemic affecting the globe.
According to SBA Mid-Atlantic Regional Administrator Steve Bulger, the SBA’s Paycheck Protection Program is “the centerpiece of the CARES act” which was passed by congress and signed by President Donald Trump on Friday. Bulger said the SBA has been put in charge of making sure small businesses have access to the program and that there is $350 billion in available funding.
The Paycheck Protection Program is going to be run in conjunction with the SBA and their lenders (i.e. banks and credit unions) who are already working with small businesses, according to Bulger, and that banks or credit union will take the applications from the small businesses, do a quick review and then send it to the SBA, who will sign off on it “very quickly.”
Once the SBA has signed off on the loan, Bulger said, the lender will give the money to the small business in order for the business to be able to pay its employees over an 8-week period of time. If the business does so, then the loan will be forgiven, where the SBA will pay out the loan to the bank using the funds received as a part of the CARES act, according to Bulger, and the Paycheck Protection Loan is a one-time loan to assist with coronavirus-related shutdowns.
“What will happen in two or three months down the road, I guess, remains to be seen. If there’s additional help needed from the government, I’m sure congress and the president will be looking at that, but for right now, they can only take out the one loan. It’s really designed to get them through about a 2-month period after they get that money received from the bank.”Steve Bulger, SBA Mid-Atlantic regional administrator
The SBA will begin accepting applications for the program on April 3 for small businesses, sole proprietors and non-profits, and Bulger said he expects the process to go very quickly because the main piece of information the bank will need to give the loan is a summary of the businesses’ average payroll over the previous year.
When the bank determines the average monthly payroll for the business, it will multiply that amount by 2.5, and that number will be the payment given out to them, according to Bulger. The SBA does not make any determination as to how much money a business will receive or if it qualifies for the loan, and Bulger said, the lender will be in charge of those determinations.
Loans for independent contractors and self-employed individuals can begin applying for the Paycheck Protection Loan beginning April 10, and part of the reason for this is to ensure no double counting will occur since some businesses will include contractors in their payroll calculations, according to Bulger, but there are some restrictions, such as a criminal record or being in default on a current SBA loan, but these loans do not take much into account prior to approval.
“In a typical loan, you have a lot of review. You’ve got to look at if they have collateral, what’s their credit score, do they have credit elsewhere, are they willing to put a personal guarantee on the loan. None of that applies here as far as SBA is concerned. We’re just looking at making it easy as possible for as many small businesses to apply quickly and get the money out.”Steve Bulger, SBA Mid-Atlantic regional administrator
Bulger said that banks are making the loans and the SBA will reimburse the loans once it is proven the loans have been paid to their employees; the SBA is receiving those funds from the CARES act, and should the business use the loan for other purposes, the SBA will only pay back that which was used for payroll.
The remaining balance is to be paid back over a 2-year period with a 0.5% interest rate, Bulger said, and businesses have also been given a 6-month deferment on repayment of these loans; if a business chooses to begin paying before the deferment period is over, it may do so without any penalty.
If a business does not pay on the loan, the SBA has guaranteed all of the loans, which, Bulger stated, makes the bank more likely to pay out loans to small business because they do not have to worry about losing money as a result of a loan going into default.
“The bank is going to make sure, they’re going to do their checks and SBA is looking at this too to make sure that it’s an appropriate size loan based on the verifiable payroll information that the small business has to provide us.”Steve Bulger, SBA Mid-Atlantic regional administrator
Information on the Paycheck Protection Program can be found at the SBA website, which also has information on the Economic Injury Disaster Loan Program, Bulger said, and the SBA lender network, which more thank 1,000 banks and credit unions are a part of, can also give information about this loan program.
Bulger anticipates that the SBA website will soon include a section on the SBA website which will allow a person to put in his/her ZIP code and show SBA-approved lenders within a certain mile radius.
“We’re hearing the stories of desperation and despair and deep concern by small business owners. They’re not looking for a handout, just a helping hand right now and that’s what we’re trying to give them to get through this shutdown period and get things started up again”Steve Bulger, SBA Mid-Atlantic regional administrator
The following are documents to help small business owners navigate the application process and get answers to common questions.