SBA Loans Overview

Overview of SBA Loans

On March 27th, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES Act), which provides funding to small businesses that have suffered losses from the pandemic. One of the largest and most successful programs that the CARES Act established was the Paycheck Protection Program (PPP), which allocated around $350 billion to small businesses. Funding is provided at the national level (Small Business Administration and Department of Treasury), but loans are distributed through local banks and credit unions. This is in addition to the SBA’s long-standing Economic Injury Disaster Loan Program (EIDL), which provides funding to small businesses that have been affected by declared emergencies.

A “small business” is considered to be any business with less than 500 employees, including non-profits, veterans organizations, sole-proprietors, and general contractors. Small businesses represent a huge part of Georgia’s economy, as they make up 99.6% of all businesses in the state. 1.6 million Georgians work for small businesses, representing 43% of the workforce.

Types of SBA Loans

Loan TypeDescription
Emergency Injury Disaster Loan (EIDL)-Provides loans up to $2 million to help meet financial obligations and operating expenses
– Loans below $200,000 approved without personal guarantee
– Payments are deferred for one year
– Interest rate will not exceed 4% per year (3.75% for small businesses and 2.75% for non-profits)
Emergency Injury Disaster Loan (EIDL) Advances– A $10,000 advance is given to companies who applied for EIDL while their application process within 3 days
– Advance does not need to be repaid even if the grantee is denied a loan
– Funds can be used to provide sick leave to employees, maintain payroll, meet increased production costs, or pay business obligations, like debt, mortgage, and rent
Paycheck Protection Program (PPP)– Loans up to $10 million are given, provided that they are used to retain workers, maintain payroll, make mortgage or lease payments, and pay utilities
– Borrow up to 2.5x average monthly payroll
– Loans can be forgiven up to the amount spent by borrower during the 8 weeks from loan origination
– Forgiveness is reduced by layoffs or pay reductions in excess of 25%
– No personal guarantee or collateral; lender defers fees, principal, and interest for at least 6 months
  • Borrowers may apply for both EIDL and PPP loans; however, they cannot be used for the same purpose
  • There have been two rounds of PPP funding
    • Round 1 ended on 4/16
    • Round 2 began on 4/27 and is still ongoing

Sources:
U.S. Chamber of Commerce: https://www.uschamber.com/sites/default/files/uscc_covid19_sb-economic-injury-disaster-loans.pdf
Georgia Chamber of Commerce: https://www.gachamber.com/wp-content/uploads/2020/03/SBA-Emergency-Loans-.pdf

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