COVID-19-related SBA loans could be available as soon as this week

PROVIDENCE – The Small Business Administration’s $349 billion in small-business capital program due to COVID-19 is expected to be operational starting Friday, the SBA has announced.

The loans, which will be distributed from the Paycheck Protection Program, are designed to keep employees on the payrolls of small businesses through the economic impacts due to the COVID-19 pandemic. It was passed as part of the $2 trillion federal Coronavirus Aid, Relief and Economic Security Act.

“This legislation provides small-business job retention loans to provide eight weeks of payroll and certain overhead to keep workers employed,” said Treasury Secretary Steven T. Mnuchin in a statement. “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.”

The program is retroactive to Feb. 15, meaning employers can rehire recently laid-off employees through June 30, the SBA said.

- Advertisement -

According to the SBA, eligible entities include: All businesses, including nonprofits, 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

The maximum amount of a loan under the program is $10 million. The program’s loan forgiveness will apply if the funds are used to cover payroll and other designated business operating expenses in the eight weeks following the date of a loan origination.

The SBA said that due to an expectation of high subscription to the program, it does not anticipate more than 25% of a forgiven amount will be for non-payroll costs.

Every loan will have a 0.5% interest rate and a maturity of two years. The first payment will be deferred for six months. The loans will not require collateral, personal guarantees and no borrower or lender fees payable to the SBA.

The loans are 100% backed by the SBA.

“This unprecedented public-private partnership is going to assist small businesses with accessing capital quickly. Our goal is to position lenders as the single point-of-contact for small businesses – the application, loan processing, and disbursement of funds will all be administered at the community level,” said SBA Administrator Jovita Carranza. “Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans. We remain committed to supporting our nation’s more than 30 million small businesses and their employees, so that they can continue to be the fuel for our nation’s economic engine.”