For business owners, these are head-spinning times. So much new information on a daily basis and imminent decisions that need to be made on people, payroll, and rent. The stimulus bill passed by Congress today and signed by the president offers $350B in new loans, with eight weeks of loan forgiveness for payroll benefits, rents, mortgage bills, and utilities as long as the business continues to pay its bills. These loans are different than the Small Business Association’s (SBA) Disaster Recovery loans, about which I sent an e-mail earlier in the week, but the SBA will administer both loan programs. Anyone who has ever applied for an SBA loan knows the process can feel pretty arduous, but these 7(a) loans are supposed to be easier and quicker to get. The government is hoping to expand its lender pool, but whether that can happen quickly or not remains to be seen. The SBA will still need to decide what proof is required under the application. We don't yet know how long underwriting and approvals will take.
The SBA 7(a) loan applies to small businesses, nonprofits, tribal businesses, and veteran’s organizations with less than 500 employees. Unlike the Disaster Assistance Loans, which cap at $2M, the SBA 7(a) loans can go up to $10M. How much your business may be entitled to depends on a multiplier (2.5) of your average monthly bills (payroll, mortgage, rent, debt obligations) plus the amount of a loan you already received under the Disaster Loan Assistance program. This mechanism looks like it effectively lets you roll a Disaster Recovery Loan into an SBA 7(a) loan. Both programs offer an interest rate not to exceed 4%. Disaster Recovery Loans allow you to get a $10K advance after the SBA receives your loan application. The 7(a) loans do not, but you get loan forgiveness. There is also payment deferment relief of six months to a year under the 7(a) loan. The 7(a) loans require more paperwork then the Disaster Recovery loans, but there are no personal guarantees.
There will be rules and procedures coming soon. I will keep you up to date.
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