SBA 7(a) Loan Program Items in the CARES Act

Close up of Business people shaking hands, finishing up meeting,The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed by President Trump on March 27th, includes small business relief in the form of SBA “paycheck protection” loans.  Key provisions of this program are highlighted below:

Highlights of the SBA 7(a) Loan Program
  • $350 billion in SBA loan guaranties, subsides and additional funding for SBA programs
    • Loans can be issued to any business, 501(c)(3) nonprofit organization, veterans organization or tribal business, provided that they do not have more than 500 employees (or other existing statutory limits for a specific industry or entity)
    • The applicable loan program covered period starts on February 15, 2020 and ends on June 30, 2020
    • The maximum loan amount will be the lesser of $10 million or an amount calculated based on a formula on payroll costs from the prior year of the loan date
      • Payroll costs are capped at $100,000 on an annualized basis for each employee
    • Loans are guaranteed by the Federal government through December 31, 2020
      • Post December 31, 2020, the guarantee percentages are 75% for loans exceeding $150,000 and 85% for loans of 150,000 or less
  • Applicable loan uses include – salaries, payroll support (including paid sick, family or medical leave), mortgage payments, rent and utilities during the covered period.
  • Loan Forgiveness – Borrowers will be eligible to apply for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the loan closing date on payroll costs, interest on mortgages, payments of rent, and utility payments, in each case that were in place before February 15, 2020.
    • The loan forgiveness amount would be reduced in proportion to any reduction in employees retained compared to the prior year and to the reduction in pay of any employee beyond 25% of prior year compensation
  • Notable loan terms for the CARES Act
    • Interest rate of 1%
    • Maturity of 2 years
    • Administrative fees for 7(a) loans will be reduced to the maximum extent possible or will be waived
    • Collateral and personal guarantee requirements are waived
    • No prepayment penalty
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We have curated some helpful resources on our COVID-19 Updates & Resources page and will continue to update it as new information becomes available. Please contact us if you have questions about these updates and how they may affect your personal and/or business situation.

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