Small business loan applications can begin Friday – here are details

RALEIGH – Treasury Secretary Steven Mnuchin says small business loans that are part of the recently passed $2 trillion coronavirus relief package should become available by April 3 with approval expected “the same day.”

Known as the Paycheck Protection Program, some $349 billion is available.

Working in a partnership with the federal government, applications can be made through private-sector financial institutions participating in the Small Business Administration program.

“This legislation provides small business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed,” Mnuchin announced Tuesday.

“Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day. The loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”

[Here is a link to a list of North Carolina financial institutions participating in the SBA 7(a) program.]

About the program

The SBA says all businesses “with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors— are eligible. Businesses with more than 500 employees are eligible in certain industries.”

Applications can be made effective April 3 for small businesses and sole proprietorships.

Independent contractors and self-employed individuals can apply as of April 10.

“We encourage you to apply as quickly as you can because there is a funding cap,” the SBA says.

The program “provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities,” the SBA says.

“Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six
months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.”

However, the plan also requires employers “maintaining or quickly rehiring employees andmaintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.”

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The treasury and SBA said that the new loan program is designed to “help small businesses with their payroll and other business operating expenses. It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees – all with a 100% guarantee from SBA.”

Loan payments also are deferred for six months.

“Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest,” the Treasury Department said.

The proram also is retroactive to Feb. 15 “so employers can rehire their recently laid-off employees through June 30, 2020,” the Treasury Department said.

Details on the program follow:

LOAN TERMS & CONDITIONS

Eligible businesses: All businesses, including non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries
Maximum loan amount up to $10 million
Loan forgiveness if proceeds used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)
All loans under this program will have the following identical features:
- Interest rate of 0.5%
- Maturity of 2 years
- First payment deferred for six months
- 100% guarantee by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA