No Doubt, many companies have already used up their PPP Proceeds but are still needing additional working capital due to the delay in being able to open back up. The CARES Act provides several options.
SBA 7(a) Loan Program (no payments for 6 months)
In the CARES Act, SBA 7(a) Loan Program borrowers are provided with 6 months of no payments on existing Guaranteed loans and on NEW SBA LOANS received before September 27, 2020.
This is a great program to take advantage of if you are looking for additional permanent working capital, refinancing current debt and or expansion loans – NOW is the time to discuss your options under this program
- An example of what a lender told me: A customer had leased several large pieces of equipment – when COVID 19 hit, they were given a deferral of 3 months on their current payments, so their payments with be starting back up again in July & August – we are looking at using this program to refinance these leases giving them an additional 6 months of no payments, to help as their cash flow recovers
Main Street Lending Program
The Federal Reserve Board made June 8th revisions to the Main Street Lending Program that will make it possible for more small and midsize businesses to receive financial support once the program opens.
Among the changes announced Monday are:
- Lowering the minimum loan size to $250,000 from $500,000.
- Increasing the maximum loan size for all three loan facilities in the program. New loans can now be as much as the lesser of $35 million (up from $25 million) or an amount that, when added to the outstanding and undrawn available debt, does not exceed four times adjusted EBITDA. Priority loans can be the lesser of $50 million (up from $25 million) or an amount that, when added to the outstanding and undrawn available debt, does not exceed six times adjusted EBITDA. Expanded loans can range from a minimum of $10 million to the lesser of $300 million (up from $200 million) or an amount that, when added to the outstanding and undrawn available debt, does not exceed six times adjusted EBITDA.
- Increasing the term of each loan option to five years from four years.
- Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
- Raising the Reserve Bank’s participation to 95% for all loans. Previously, the Reserve Bank purchased 85% of priority loans in the program.
PPP – Payment Protection Program – Last Day
The Paycheck Protection Program currently ends on June 30, 2020, so if you have not applied, you must submit your application TODAY.
On June 18 both houses of Congress introduced legislation (Senate is calling theirs the Prioritized Paycheck Protection Program (P4) Act) where small business who are still struggling because the shutdown has lasted longer than originally anticipated, would allow businesses with fewer than 100 employees to apply for a second PPP loan if they have used up (or are on pace to exhaust) their first PPP loan and can show a 50% loss in revenue due to the COVID-19 pandemic.
Economic Injury Disaster Loan program (EIDL)
All small businesses can again apply for low-interest disaster loans
- The SBA is offering low-interest federal disaster loans for working capital to small businesses and non-profit organizations that are suffering substantial economic injury as a result of COVID-19.
- These loans may be used to pay debts, payroll, accounts payable, and other bills that can’t be paid because of the disaster’s impact and that are not already covered by a Paycheck Protection Program loan. The interest rate is 3.75% for small businesses and 2.75% for non-profits. Your monthly payments will be deferred for one year.
- In addition, small businesses and non-profits may request, as part of their loan application, an EIDL Advance of up to $10,000. The EIDL Advance is designed to provide emergency economic relief to businesses that are currently experiencing a temporary loss of revenue. This advance will not have to be repaid, and small businesses may receive an advance even if they are not approved for a loan.
- For loan amounts of greater than $25,000, Borrower hereby grants to SBA, a continuing security interest in and all “Collateral.”
- EIDL applications that have already been submitted continue to be processed.