How Small Businesses Can Apply For Relief

This article contains breaking news and events related to the current state of politics and the economy. While we try our best to keep our articles as up-to-date as possible, the ongoing effects of COVID-19 are happening in real time and information is subject to change.

The economic consequences of the COVID-19 epidemic have been particularly devastating for small businesses across the country.

And since small businesses employ nearly half of all American workers, the risk of many small businesses being forced to shut down or shed employees poses a major threat to the economy as a whole.

To address that risk and help prop up the small business sector, on April 3, the U.S. Small Business Administration rolled out the new Payroll Protection Program (PPP). This program will provide a total of $350 billion in forgivable loans for small businesses and nonprofits that pledge to avoid layoffs.

These loans can be used to make payroll, mortgages, rent, and other expenses. It’s a key piece of the CARES Act, the massive economic rescue package Congress recently passed.

The funds are given out on a first-come, first-served basis until the $350 billion runs out. Lantern has a way to apply to multiple partners who are participating in the PPP, allowing small business owners to compare small business loan offers that include PPP loans.

Here are more details about the program and how it could help your small business:

What is the PPP?

The PPP enables small businesses to take out loans totaling 2.5 times their average monthly payroll in 2019. Loan payments are deferred for six months. The loans are designed to cover eight weeks of expenses.

It’s run through lenders that are part of the Small Business Administration (SBA)’s 7(a) loan program which provides financial support to eligible small businesses. The lenders are primarily banks and credit unions both big and small.

The loans are 100% backed by the SBA. They are given to small businesses without collateral requirements, personal guarantees, SBA fees, or credit elsewhere tests.

Who does the program apply to?

The funds generally apply to small businesses with 500 employees or fewer—though there may be exceptions for businesses with more employees that still fall within the SBA’s size standards . Sole proprietorships, contractors, and those who are self-employed are also eligible.

For certain businesses in the hospitality and food industries, like hotels and restaurants, the PPP enables individual locations with under 500 employees to apply even if they are part of a large national chain.

For example, it could apply to a single hotel that has fewer than 500 employees in a specific city, even though the larger hotel chain itself has more.

Any eligible small business must have been in operation prior to February 15, 2020.

How much money could eligible small businesses get?

Loans can be for up to 2.5 times the small business’ total monthly payroll from the last year. The maximum loan amount is $10 million with a fixed 1% interest rate and maturity of two years.

Payroll costs will be capped at $100,000 annualized per employee. For details from the Department of the Treasury about what counts as payroll costs and how the loans can be used, visit their website here .

When do applications open?

For small business owners and sole proprietorships, applications opened on Friday, April 3 . For independent contractors and those who are self-employed, applications open on April 10. Applications close on June 30 or whenever the money for the program runs out.

How can small businesses apply?

Those eligible can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, or Farm Credit System institution that is participating. Other financial institutions are expected to soon become eligible to participate as well.

Small businesses can also find lenders through Lantern, a marketplace for financial products that is owned and operated by SoFi. Lantern makes it easier to shop across multiple companies for lending products and offers include PPP loans.

While some banks expressed concerns about the loan terms and said they may not participate in the PPP, there have not been any major news reports of lenders avoiding participating. Be sure to check with your lender to make sure they are participating in the program.

How can the loan be fully forgiven?

To be eligible to potentially have the PPP loan forgiven, an eligible small business needs to:

1.   Spend the PPP funds on payroll, rent, mortgage interest, and utilities during the eight weeks after the loan is made

2.   Then spend at least 75% of the PPP funds for payroll.

Some businesses could have their loans partially forgiven. If a business owner already laid off workers, they can rehire employees and still receive loan forgiveness as long as they rehire those employees by June 30, 2020.

Additional Resources

Things are changing quickly. For the latest information and full details of the SBA PPP program, check out these additional resources:

Click here to go to SBA’s website about the PPP for more details.

Click here for a Q&A from the Treasury Department with details about eligibility, application specifics, and applications for loan forgiveness.

SoFi receives compensation in the event you obtain a loan through the Lantern marketplace. The Lantern website is owned by SoFi Lending Corp. or an affiliate, a lender licensed by the CBO under the CFL, license number 6054612, NMLS #1121636. Loans may not be available in all states, such as MS.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.