COVID-19 Emergency Loans for Small and Mid-Sized Businesses

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The Coronavirus Aid, Relief and Economic Security (CARES) Act authorized three programs to provide more than $1.2 trillion in immediate loan assistance for small and mid-sized businesses (including sole proprietorships, independent contractors, self-employed individuals and qualifying nonprofit organizations) impacted by the pandemic and economic downturn. These three programs include the SBA’s Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) Program, as well as the Federal Reserve’s Main Street Lending Program (MSLP).



A small business may be eligible for a PPP loan if the loan is needed to support ongoing operations and the business:

  • Has 500 or fewer employees; Affiliation rules regarding related entities applies for determining eligibility except in limited circumstances, such as businesses in the “accommodation and food services” sector under the NAICS (i.e., NAICS codes beginning with 72)
  • Meets the SBA’s Small Business Size Standards by NAICS Industry; or
    • Standards table
    • Business size classification system tool
  • Has a maximum tangible net worth of $15 million or less and an average net income of $5 million or less for the past two full fiscal years
  • Maximum amount: lesser of (1) 2.5 times the average monthly payroll costs for the year prior to the loan date and (2) $10 million
    • Payroll costs include: (1) salaries, wages, commissions, or similar compensation; (2) pay of cash tip or equivalent; (3) payment for vacation, parental, family, medical and sick leave; (4) allowances for dismissal or separation; (5) group health care benefits and premiums; (6) retirement benefits; and (7) state and local tax assessed on employee compensation
    • Payroll capped at $100,000 per employee on an annualized basis, and does not include: (1) employees residing outside of US; or (2) qualified sick leave or family leave wages for which credit is allowed under Families First Coronavirus Response Act
  • Permitted uses
    • Payroll costs, including benefits
    • Interest on mortgage obligations incurred before February 15, 2020
    • Rent under lease agreements in force before February 15, 2020
    • Utilities for services in place before February 15, 2020
  • Time to use funds (covered period)
    • For PPP loans that originated before June 5, 2020: borrower may elect to use the funds either by:
      • Eight weeks after the funds are disbursed (as originally provided under the CARES Act); or
      • 24 weeks after the funds are disbursed or December 31, 2020, whichever is earlier (as subsequently provided under the PPP Flexibility Act)
  • Forgiveness
    • Loan funds are fully forgivable, subject to restrictions (see below)
    • Deadline to apply for forgiveness: October 31, 2021
    • Amount forgiven will be reduced if:
      • More than 40% of funds was used toward non-payroll costs;
      • Reduction in salaries/wages greater than 25% for employees making less than $100,000, unless (a) fully restored by December 31, 2020, or (b) unable to fully restore due to an inability to return to pre-COVID-19 business activity;
      • Reductions in full-time head count for employees making less than $100,000, unless (a) fully restored by December 31, 2020 or (b) unable to fully restore due to an inability to re-hire the same or similarly qualified employees or to return to pre-COVID-19 business activity; or
      • Also received EIDL Advance (see below)
    • For loan amount not forgiven
      • Term
        • For PPP loans that originated before June 5, 2020: 2 years (but borrower and lender may agree to extend term)
        • For PPP loans that originated on or after June 5, 2020: minimum of 5 years; maximum of 10 years (at lender’s discretion)
      • Deferment
        • If borrower applies for forgiveness within 10 months of the end of their covered period, then principle and interest payments will be deferred until the SBA makes a decision on the forgiveness application
        • If borrower does not apply for forgiveness within that time, principle and interest payments will begin immediately thereafter (i.e., 10 months after the end of their covered period)
      • Interest rate of 1%
  • Find an SBA-approved lender participating in the PPP program
    • Many lenders are prioritizing their existing customers, so best to check with your existing lender first
    • In addition to banks, you may be able to submit an online application to certain SBA-approved direct/non-bank lenders, such as:
      • Intuit QuickBooks - only current customers
      • Kabbage
      • Cross River Bank
      • Celtic Bank
      • Radius Bank
      • Divvy
    • For an SBA tool designed to match lenders and borrowers
  • Compile supporting documentation for your lender. Most lenders will likely require the following, which your payroll provider may be of assistance in collecting:
    • 2019 IRS Quarterly 940, 941 or 944 payroll tax reports
    • Payroll reports for a 12-month period (ending on your most recent payroll date), which show the following information:
      • Gross wages for each employee, including officer(s) if paid W-2 wages
      • Paid time off for each employee
      • Vacation pay for each employee
      • Family medical leave pay for each employee
      • State and local taxes assessed on an employee's compensation
    • 1099s for independent contractors for 2019
    • Documentation showing total of all health insurance premiums paid by the company owner(s) under a group health plan
      • Include all employees and the company owners
    • Document the sum of all retirement plan funding that was paid by the company owner(s) (not to include funding that came from employees out of their paycheck deferrals)
      • Include all employees and the company owners
      • Include 401(k) plans, Sime IRA, SEP IRAs
  • Complete an application form by August 8, 2020
    • As part of the application process, you will be required to certify that:
      • Current economic uncertainty makes the loan necessary to support ongoing operations;
      • The funds will be used to retain workers and maintain payroll or to make mortgage, lease and utility payments;
      • You have not and will not receive another loan under this program;
      • You will provide documentation that verifies the number of full-time employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments and covered utilities for the covered period; and
      • All information in the application and all supporting documents and forms are true and accurate



  • A small business may be eligible for an EIDL loan if the business has suffered a “substantial economic injury” as a direct result of COVID-19 and:
    • Has 500 or fewer employees;
    • Meets the SBA’s Small Business Size Standards by NAICS Industry; or
    • Is a private non-profit organization or a 501(c)(19) veterans organization
  • Types of funds
    • EIDL Advance/Grant ("Advance")
      • Immediately provided upon request in application for EIDL Loan (i.e., no approval required)
      • No obligation to repay
    • EIDL loan
      • Must be approved in order to receive
      • Obligation to repay (as discussed below)
  • Maximum amounts
    • Advance: $10,000
    • EIDL loan: $2 million
  • Permitted uses: working capital for fixed debts, payroll, accounts payable and other unpayable bills due to COVID-19
  • Prohibited uses: refinance long-term debt; expand facilities; pay dividends or relocate; duplicate use of PPP funds
  • Not forgivable, but some EIDL loan amounts may be eligible to convert into a PPP loan, which may be forgivable (see above)
  • Terms of up to 30 years for EIDL loans with automatic deferral of principal payments for one year (interest begins to accrue upon loan disbursement)
  • Interest rate of 3.75% (2.75% for nonprofits)
  • Collateral/Personal Guaranty: no collateral required for EIDL loans of $25,000 or less; if greater than $25,000, collateral is required (general security interest in business assets may be sufficient); if greater than $200,000, also need personal guaranty of individual with a 20% or greater ownership interest
  • Complete application, available online through the SBA only
    • As part of the application process, you will be required to certify that the business is eligible to apply for an EIDL loan
  • Compile supporting documentation related to: EIN/SSN; gross revenue for past 12 months; cost of operations; and other compensation received, such as insurance claim payments, related to COVID-19


  • A small or mid-sized business may be eligible for an MSLP loan if needed due to COVID-19 and the business:
    • Has 15,000 or fewer employees; or
    • Had $5 billion or less in revenue for 2019
  • Receiving a PPP loan or EIDL loan does not make a business ineligible for an MSLP loan
  • Types of funds
    • New MSLP loans; and
    • Increases in other non-MSLP loans that originated prior to April 8, 2020 (Existing Loan Increases)
  • Loan amounts
    • New MSLP Loans
      • Minimum of $250,000
      • Maximum is lesser of: (i) $35 or $50 million; or (ii) an amount that, when added to existing outstanding and undrawn available debt, does not exceed four or six times adjusted 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”)
      • Existing Loan Increases:
        • Minimum of $10 million
        • Maximum is lesser of: (i) $300 million; or (ii) an amount that, when added to existing outstanding and undrawn available debt, does not exceed six times adjusted 2019 EBITDA
  • Permitted uses: refinance up to $50 million in existing debt; note: the borrower must use reasonable efforts to maintain payroll and retain workers during the term of the loan, but permitted use is not limited to such goals
  • Prohibited uses: repaying other debt unless such payments are mandatory and due; buying back stocks; paying dividends
  • Not forgivable
  • Five-year term
  • Deferment
    • Principal payments: deferred for two years
    • Interest payments: deffered for one year
  • Adjustable interest rate between approx. 3.16% and 3.30% (as of July 2, 2020)
  • No prepayment penalty
  • Collateral/Personal Guaranty: New MSLP Loans and Existing Loan Increases may be secured or unsecured, depending on the particular loan agreement’s terms; but, Existing Loan Increases must be secured if the underlying loan is secured
  • Find and contact an eligible lender (includes U.S. banks and other federally insured depository institutions and US branches of foreign banks; does not include direct/non-bank lenders)
    • Best to reach out to your existing lender first, if eligible and participating, and then your local FDIC bank
    • Find an FDIC bank
  • Review your 2019 financials to calculate your potential loan amount based on 2019 EBITDA and compile other supporting documentation for your lender
  • Complete lender's application
    • As part of the application process, you will be required to certify that:
      • The funds will not be applied toward any prohibited uses (above);
      • There is a reasonable basis to believe the business has the ability to meet its financial obligations for at least the next 90 days and does not expect to file for bankruptcy during that time period; and
      • The business is eligible to participate in the MSLP
  • Continue to monitor the Federal Reserve's MSLP announcements


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