In obtaining the SBA loan, you first must submit a flawless loan application as it may be denied and feedback is not given quickly if at all. The SBA loan has several parts as follows:
- Apply up to $2,000,000. However, the maximum loan amount you can obtain is based on the number of employees, revenue, your needs and your credit score.
- Use to fund your existing business operations not growth.
- Must pay back this loan.
- Must be used for expenses other than Payroll, Rent, Utilities & Mortgage Interest.
- If you already have an SBA loan before March 31, 2020, the SBA will pay the principal, interest and fees for 6 months.
Paycheck Protection Program (PPP)
- Apply up to $10,000,000. However, the maximum loan amount you can apply for is generally the average monthly payroll over the last 12 months times 2.5. Some restrictions do apply.
- Use this loan for Payroll, Rent, Utilities or Mortgage Interest then you do not pay this loan back and it is excluded from your income.
- Obtain PPP by having your payroll and financial information up to date.
- Must prepare an accounting package which shows you disbursed the loan funds in accordance with the covenants.
Other Key Provisions
- Defer 100% of your payroll taxes for 2 years. Payroll taxes is defined as the employer portion of social security and medicare. For self-employed individuals payroll taxes is based on self-employment taxes.
- If your business had losses in 2018, 2019 and 2020, amend your tax returns to receive cash back.
- Obtain a Payroll Tax credit up to $10,000 per employee.
- If you apply for the Disaster Loan, you could receive a $10,000 advance in 3 days. Should you be denied this loan, you do not need to repay the advance.
- Take money from your retirement up to $100,000 and do not pay the 10% early withdrawal penalty.
If you are receiving assistance through the Paycheck Protection Program (PPP), you cannot defer your payroll taxes nor use the payroll tax credit.
Beware of Fraud, like the Internal Revenue Service, the Small Business Administration(SBA) will not email or call you if you have not already applied for the loan.
In closing, you not only want to obtain approval of the loan but also be approved for the highest amount. Once you receive the money, spend it on the right expenses, in the right time-frame and with the right documentation. If you do not follow the covenants, then you must pay it back.
If you have any questions concerning the Cares Act SBA Loan, please feel free to contact us at 630.523.5762.
Susan Mairo, CPA