NJBIA traveled (virtually, of course) to Fort Worth, Texas for a webinar by the Fort Worth chapter of SCORE and the Tarrant County SBDC to find out more about the Paycheck Protection Act. The following information was obtained from this webinar.
Please note that this information does not constitute legal advice, and individual businesses should consult with their attorneys and accountants when applying for any of the SBA loan products. Also, this information is changing all the time.
Paycheck Protection vs. Economic Injury
The SBA is offering two loan programs to help businesses survive the pandemic intact—The Economic Injury Damages Loan (EIDL) program and the Paycheck Protection Program (PPP). Both are available to independent contractors.
You can apply for both. There seems to be some confusion that if you get one loan, you will not be eligible for the other. The programs are trying to prevent “double dipping” for operating expenses, either on purpose or accidently. So, if part of your claim for economic injury in your EIDL application are the wages you paid to employees, you should not get a loan for wages under the PPP. Businesses should work with their accountants and attorneys to make sure the applications have the right information on them.
Applying for Loans
The EIDL is being run directly by the SBA, while the PPP loans will be processed by an expanded list of SBA lenders under Chapter 7a.
Businesses can apply for EIDL directly to the SBA. If applying online, make sure you get a loan ID number when you submit your application. If you do not have a loan ID number, then SBA probably did not receive your application.
The PPP loans are for an eight-week period beginning with the loan origination and occurring between Feb. 15 and June 30, 2020. During this period, if you maintain full employment and do not reduce wages more than 25% over what you paid last year, the loan can be forgiven.
If you have already laid off employees, you can still have the loan forgiven if you rehire them within 30 days of March 27 and pay them for the prescribed period.
Other Loan Assistance
In addition to the two main loan programs and the optional grant, businesses could get up to $25,000 in the form of a bridge loan to cover more immediate expenses. The SBA is not funding the loans but is guaranteeing them up to 50% of the full loan amount.
Additionally, the SBA has a program to pay off older loans.