Q&A WITH TINA NGUYEN CPA: WHAT SHOULD YOU KNOW ABOUT COVID 19 RELIEF PACKAGE

Question 1: WHO IS ELIGIBLE FOR COVID-19 RELIEF FOR SMALL BUSINESSES?

If you are business owner in all U.S. states and territories, and your businesses under below categories, you are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19).

  • Small Businesses  (under 500 employees)
  • Sole Proprietors (under 500 employees)
  • Cooperatives (under 500 employees)
  • Employee Stock Ownership Plan (ESOP) (under 500 employees)
  • Tribal small business (under 500 employees)
  • Agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative (under 500 employees)
  • Business with more than 500 employees but under SBA Size Standards
  • Private non-profit organization with IRS designation 501(c),(d), or (e OR State evidence is a non-profit one organized or doing business under State law, or a faith-based organization.

Question 2: WHAT IS PAYCHECK PROTECTION PROGRAM?

The Paycheck Protection Program (PPP), a provision of the CARES Act, offers forgivable low-interest loans to small businesses facing uncertainty during the COVID-19 emergency, so you can retain workers, maintain payroll, and cover certain other existing overhead costs.

SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

Lenders may begin processing loan applications as soon as April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020.

Some benefits of this program including:

  • Funded by US Government thru banking system
  • Loan may be forgivable to extent used from 2/15/20 to 6/30/20
  • Funds may be used on payroll, rent, fixed debt, accounts payable
  • Interest rate is 1% or less with up to 2 year term
  • Access this loan thru your bank – Existing SBA Lenders, Not all banks will have this program
  • Funds available up to $10 M, First come – First serve
  • Funds may be up to 2.5X average payroll ($10 M max)

Question 3: WHAT IS THE SBA DISASTER ASSISTANCE LOANS?

The disaster loan program from the SBA is in place to provide economic relief to businesses impacted by natural disasters throughout the United States. The program is used extensively after detrimental events where businesses can receive low-interest loans to get back on their feet.

Since early March, this offering has been extended to small businesses across the nation that have had significant losses due to the coronavirus pandemic. These loans have a 3.75% interest rate for small businesses and a 2.75% rate for nonprofits, and are usually capped at $2 million.

Some benefits of this program including:

  • Low interest rates:
    • 3.75% for business
    • 2.75% for non-profits
  • Advance funds available up to $10,000 for both Economic Injury and Coronavirus  (This advance loan is forgiven per the SBA website).
  • Loans up to $25,000 may be unsecured
  • Loans greater than $25,000 must be secured by collateral
  • Funds may be used for working capital, fixed debt, payroll, accounts payable, and other bills
  • Must apply thru the SBA website https://www.sba.gov/disaster-assistance/coronavirus-covid-19
  • Documents required:
    • Must provide P&L, Balance Sheet
    • Provide 3 years business and personal tax returns
    • Financial statements will be analyzed for liquidity

Question 4: WHAT IS THE DIFFERENCE BETWEEN SBA DISASTER ASSISTANCE LOANS AND PPP?

Source: https://www.zenefits.com/workest/paycheck-protection-program-vs-disaster-loan-which-one-is-right-for-my-smb/

Question 5: HOW MAY I USE THE PPP AND SBA DISASTER RELIEF FUND?

For Paycheck Protection Program, business owners can use the fund for the following activities:

  • Payroll cost, including benefits
  • Interest on mortgage obligations, incurred before 02/15/20
  • Rent, under lease agreements in force before 02/15/20
  • Utilities, for which service began before 02/15/20

For SBA Disaster Loan, business owners can use the fund for working capital, fixed debt, payroll, accounts payable, and other bills

Sources: Sba.gov

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