The Chamber hosted a webinar on Tuesday, April 14, with representatives from SBDC and local lenders explaining the process and status of the federal programs available to small businesses through the U.S. Small Business Administration (SBA) for COVID relief. The conversation focused on the Paycheck Protection Program (PPP), a new relief program through the CARES Act, and the Economic Injury Disaster Loans (EIDL), which businesses may have encountered before in relation to natural disasters.
Comparing Payment Protection Program and Economic Injury Disaster Loans
CT Small Business Development Center’s Matthew Pugliese explained the Center’s mission to assist businesses free of charge: “We are here to help businesses assess the different disaster loan programs that are available, to prepare their materials and submit their applications, and also to report on the backside, to move forward and apply for the forgiveness portions of these loans.”
In his presentation he offered a comparison of the PPP and EIDL, which can be found at their website’s COVID-19 Business Resource Center along with other resources for small businesses. The website offers an opportunity to reach out for no-cost assistance.
The PPP offers a 1% interest rate loan over 2 years, eligible for 100% forgiveness if businesses meet the requirement of using 75% of the loan for payroll expenses. The EIDL provides more flexibility for how it is used, with up $10,000 of an advance eligible for forgiveness, and terms of 3.75% over 30 years. There are also SBA Bridge Loans for up to $25,000 for disaster-related purposes, designed be disbursed by SBA lenders on an emergency basis.
Banks Explain PPP Process and Status
PPP loans are being processed and disbursed through local lenders, a process which began on April 3. Peter Linehan, Relationship Manager, VP Business Banking, People’s United Bank and Tony Joyce, EVP Senior Loan Officer, Chelsea Groton Bank, provided an overview of the process and current status of the program. Both banks offer information on the program: Chelsea Groton Bank and People’s United Bank
“We have been PPP all the time, around the clock for the better part of two weeks trying to get as many of our customers in the program as possible,” said Joyce. He reported the initial $350 billion allocated by the federal government has been heavily tapped and the government is working making additional appropriations.
Linehan noted businesses meeting requirements for documentation and quick turnaround times are crucial to receiving funding. He explained that 941 forms in conjunction with the PPP application are the two primary documents needed. Banks are focused on servicing existing customers first as they manage thousands of loan requests coming in. Most importantly, do not apply at more than one lender as that opens businesses up to fraud charges.
Expenditures & Loan Forgiveness
Joyce suggested the most challenging part will be the forgiveness process, and he noted that businesses have to be careful about tracking expenses and meeting the requirement that 75% of the loan be used for payroll expenses within the eight week time period. Businesses that have employees who are temporarily laid off or furloughed need to be sure they are bringing them back in time. “If you accept this funding, just make sure you are well aware of the timing and the practical aspects of it,” said Joyce.
Linehan recommended businesses look at the EIDL program to see if it is a better fit: “If you are looking for working capital or you need a way to keep the lights on, that is the better program.”
Reapplying for EIDL to Secure Grant
Businesses that apply for the EIDL are eligible for up to $10,000 as an advance in funds, which is designed to transfer into a grant. Those who applied for the EIDL prior to the March 27 passage of the CARES Act will need to reapply for the EIDL and check the box in order to request the advance funds. The reapplication will not impact the status of the in-process application.
Many banks are also offering a loan deferment program. Discuss existing loans with your lender to see if they are offering interest and/or payment deferments.