COVID-19 RELIEF PROGRAM WILL PUMP CASH TO SMALL BUSINESS, NONPROFITS TO MEET PAYROLLS, KEEP WORKERS
Banks can start taking applications on Friday
With small businesses and nonprofits in desperate need of quick cash because of the COVID-19 pandemic, employers starting Friday can apply for federal loans with a crucial feature: Loans can be converted to grants if the money is used to keep workers on the payroll.
The financial lifeline, to be run through the Small Business Administration, is aimed at keeping employers in business and workers getting paid.
The $349 billion new “Paycheck Protection Program” is in the $2.2 trillion Coronavirus Aid Relief and Economic Security Act signed into law last Friday.
President Donald Trump said Tuesday that banks can start accepting applications for the Small Business Administration program Friday.
Illinois has been on lockdown for almost two weeks — with more weeks to come. Jobs are evaporating, and cash flow to employers is a trickle or already gone.
According to Treasury Department guidance issued Tuesday, banks will be moving at breakneck speeds so applications will be “approved on the same day. The SBA backed loans will be forgiven as long as the funds are used to keep employees on the payroll and for certain other expenses.”
The cash may at least buy some time as COVID-19 spreads. Here are details released by the Treasury Department on Tuesday:
♦ This is the most crucial element and bears repeating. “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.”
♦ Another very important feature. The loans can be retroactive from Feb. 15, 2020, “so employers can rehire their recently laidoff employees through June 30, 2020.”
♦ The intention is to allow this money to flow to all sorts of struggling entities. Businesses, nonprofits, veterans organizations, sole proprietorships, self-employed individuals and independent contractors. For most, the main yardstick for eligibility is to have 500 or fewer employees.
♦ The loans are available from banks or credit unions that are SBA lenders.
♦ All loan payments will be deferred for six months.
♦ And if the money remains a loan, the interest will be 0.5%
♦ The dire need to keep employers above water means the loans will be made with no collateral or personal guarantees necessary.
♦ The SBA will not charge borrower or lender fees.
♦ The maximum loan is $10 million. An analysis of the federal relief legislation by Illinois Sens. Dick Durbin and Tammy Duckworth, both Democrats, noted that it also contains $17 billion for the SBA to “cover six months of payments for existing SBA loans.”
♦ More information and the application can be found at SBA.gov/Coronavirus.
Another way to keep cash flowing to paychecks is to give employers relief on federal taxes.
The Treasury Department on Tuesday said excise tax payments can be delayed for wine, beer, distilled spirits, tobacco and other products “negatively affected by COVID-19.”