How to get a small-business loan under the new $484 billion coronavirus aid package

A $484 billion coronavirus aid deal finalized Tuesday promises to breathe new life into two small-business loan programs that are designed to combat the economic devastation caused by the coronavirus.

In recent weeks, the Small Business Administration and thousands of its affiliated banks were overwhelmed by an unprecedented crush of applications, forcing a temporary halt to some lending activities. Although the programs succeeded in quickly pumping hundreds of billions of dollars into an economically devastated business community, many small companies are still awaiting funds.

The initial loan rollout was marred by glitchy online portals, a chaotic regulatory process, a lack of cooperation from big banks and a struggling bureaucracy. Some large hotel and restaurant chains received loans that were meant for Main Street businesses, prompting calls for change.

The bipartisan deal finalized Tuesday includes $250 billion for the Paycheck Protection Program, a new federal loan program that allows qualified banks to offer low-interest loans that can later be forgiven. It also provides $60 billion for Economic Injury Disaster Loans, a parallel program operated by the SBA.

If the deal survives a vote in the House of Representatives and receives the president's signature, struggling small businesses who were left out of the initial round of funding will get another shot.

Here's how your business can access the new funding:

Q: How do I apply through the Paycheck Protection Program?

A: The most recent application form is posted on the Treasury Department's Cares Act resource page. Once you gather the information described in the form, you should contact an SBA-approved lender. You can find one by plugging your ZIP code into an online tool on the SBA's website.

Borrowers are advised to apply online or by phone rather than in person. If you don't already have an established banking relationship, your application will be handled on a first-come, first-served basis, SBA and Treasury officials have said.

Q: How do I apply for an SBA disaster loan?

A: There are three ways to apply for an SBA disaster assistance loan. The SBA operates an online portal where you can upload business documents and apply for a loan.

You can also fill out the documents linked on the agency's website and mail them to the SBA's processing and disbursement center at 14925 Kingsport Rd., Fort Worth, TX, 76155-2243. The agency's forms say applicants can also submit forms in person at an SBA disaster center.

Q: Can I apply for both SBA loan programs?

A: Businesses that receive a disaster loan can later refinance it into any Paycheck Protection Program loans they receive, offering a chance to lower the interest rate. A single business cannot apply for more than one Paycheck Protection Program loan, however.

Q: Which businesses qualify for the SBA loan programs?

A: For the Paycheck Protection Program, small businesses, nonprofits and tribal business concerns that meet the SBA's standard business size definition and veterans organizations organized under 501(c) (19) with fewer than 500 employees are eligible for loans under the program. Self-employed individuals, independent contractors and sole proprietors also are eligible. To receive a loan, your company must have been in business as of Feb. 15. Churches also qualify to the extent that they meet the other requirements of the Cares Act, the SBA announced Saturday morning.

Large hotel and restaurant chains can get loans for individual locations, though that practice has been met with controversy. Shake Shack agreed to return its $10 million SBA-backed loan after news articles identified it among several large restaurant and hotel chains receiving small-business loans.

"Household employers," which include people who hire nannies and housekeepers, are excluded from the program.

For SBA disaster loans, businesses in any U.S. state with fewer than 500 employees, who are unable to pay their bills because of the coronavirus, can apply.

There are criminal penalties of up to $1 million for submitting fraudulent information to a federally-insured lender.

Q: What should I do if my primary bank will not accept my PPP application?

A: Many banks, including Bank of America and JPMorgan Chase, have limited applications to customers with preexisting relationships. Under the program, banks must conduct due diligence on small businesses' applications, and banking industry officials have said that process is easiest with companies they already know well.

That led to complaints from some mom-and-pop businesses who said they were being crowded out of the program by larger companies with extensive ties to big banks.

Many smaller community banks and credit unions are accepting applications from new customers. Also, the new funding bill includes $60 billion for lenders with less than $50 billion in assets, giving small community banks a piece the industry has said will help them serve smaller companies.

Q: My bank did not respond to the application I filed. Should I apply again?

A: Nearly 80% of the small businesses that applied for a loan were still waiting for an answer as of April 17, the day after the program ran out of money, and many didn't know where they stood in the process, according to the National Federation of Independent Business.

Banks have said they process loans on a first-come, first-served basis, and many continued accepting applications after the program's initial funds were exhausted. Small-businesses owners should check with their bank to determine where they stand in the process.

Q: What costs will the new loans cover?

A: The new loans will cover payroll costs, employee benefits, mortgage interest incurred before Feb. 15, rent and utilities under lease agreements before that date, and utilities for which the service began before February. At least 75% of the loan must go toward payroll, according to a regulation published April 2.

Payroll costs include salary wages, commissions and tips capped at $100,000 for each employee. It also includes benefits for vacation, parental leave, medical leave, sick leave and some other limited benefit categories. The Paycheck Protection Program excludes sick and family leave that also qualifies for certain IRS tax credits, according to an April 6 fact sheet from the Treasury Department. Information on Cares Act tax credits can be accessed on the IRS website.

The Treasury Department directs borrowers to calculate their payroll for purposes of the loan program without including federal taxes.

You should not include payments your business makes to independent contractors or subcontractors; the Treasury Department directs them to apply separately.

The new loans apply to costs incurred from Feb. 15 to June 30, though that time period can be adjusted for businesses with especially seasonal income.

Q: What's the interest rate?

A: Interest rates for the Paycheck Protection Program were initially set at 0.5%, but they were increased to 1% after lenders raised concerns. The Cares Act caps Paycheck Protection Program loans at 4%, so it is possible the rate could increase again.

Interest rates on disaster assistance loans are set at 3.75% for small businesses and 2.75% for nonprofits.

Q: Can my SBA loan be forgiven?

A: Yes. The program includes loan forgiveness covering costs for the first eight weeks of the loan for companies able to keep employees on the payroll or continue paying bills.

The amount of loan forgiveness will include payroll costs for individuals below $100,000 in annual income, mortgage and rent obligations, including interest and utility payments, according to the SBA. If an employee is above a $100,000 annual salary, the first $100,000 will be factored into the company's loan forgiveness total excluding any amount above that. The payroll cost includes health care benefit payments, retirement benefits, and state and local taxes. It excludes employees who live outside the United States, according to the SBA.

The amount of loan forgiveness will be reduced if your workforce is drawn down through attrition or wages are reduced. You may be able to preserve some of your loan forgiveness by rehiring employees.

Although SBA disaster loans cannot be forgiven, they can be refinanced into a forgivable Paycheck Protection Program loan.

The SBA is expected to release more information about how to apply for the loan forgiveness.

Q: How do I prove that my losses are because of the coronavirus?

A: The new loans are available to any business for which "current economic uncertainty makes the loan necessary to support your ongoing operations," according to an SBA fact sheet. Your lender will determine whether you qualify without a separate SBA review, though the SBA will check to see whether you have already received one.

Q: How much money can my business receive through the new loan program?

A: The Paycheck Protection Program provides small-business loans of up to $10 million to cover payroll and some other expenses, or 2 1/2 times your total payroll expenses for the loan period. Other SBA loan programs, including the federal disaster relief program, offer much smaller loans.

Q: What sort of thing could disqualify me?

A: The SBA disqualifies businesses that are "engaged in any activity that is illegal under federal, state or local law," according to an SBA regulation. You will be excluded from the program if any of your firm's owners have been suspended, debarred, proposed for debarment, declared ineligible, are involved in bankruptcy proceedings, or have previously taken a small-business loan that caused the government to incur losses, according to the Treasury Department's application form.

Felony convictions only exclude you if it happened within the last five years, according to the Treasury Department.

Q: Can I use the loan to pay my salary if I am the sole proprietor?

A: According to an SBA regulation published Thursday evening, independent contractors and sole proprietors can calculate their payroll by adding up "wages, commissions, income, or net earnings from self-employment or similar compensation."

Q: What if the money runs out again?

A: Some bankers have warned that this could happen.

After the initial $349 billion was exhausted, many banks continued to process applications that they plan to submit once the program receives more funding. Bankers have said they expect the money to be spent faster this time, potentially in just a few days, since so many applications will be submitted at once. Also, kinks in the program that slowed the application process initially have largely been worked out, which banking industry officials say should also speed the process.

If that happens, it will be up to Congress to decide whether to provide the Paycheck Protection Program more funding.

Economists at Bank of America have said the program may ultimately need close to $1 trillion to help all eligible small businesses.

Q: How can I find more information?

A: Your primary points of contact for information on federal loan programs should be the Small Business Administration or an SBA-qualified financial institution. You can reach the SBA by email at or by phone at 1-800-827-5722. The Treasury Department has also posted its own fact sheet on the program on its Cares Act resource page.

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