By Joe Abro // Abro & CO., CPA, PC
We have spoken to many of you regarding the different loan options and disaster relief available through the CARES Act. I wanted to reach out to each and everyone and explain the different rules and qualifications of the Paycheck Protection Program Loans (PPP Loans) and the Economic Injury Disaster Loans (EDIL).
Small Businesses and Sole Proprietorships affected by the coronavirus pandemic can apply for various loans and grants.
Based on the CARES Act, the PPP Program has a cap of $349 Billion and the demand is likely to be high. So we advise to get your applications into the bank ASAP Starting on Friday April 3rd, 2020.
I have attached very informative guidance directly from the Small Business Administration that everyone should familiarize themselves with. Also below are summarized bullet points on each program.
Paycheck Protection Program (PPP) Loan
- Available to Small businesses with fewer than 500 Employees
- Up To $10 Million in SBA guaranteed Loans
- Size of loans are based on 2.5 times average monthly payroll. Compensation of any individual is limited to $100,000 annually. Loan forgiveness is tied to this calculation. (See Below and attached documentation to see how this will be calculated)
- Loan can be used to pay for: Payroll, Health Insurance, Rents, Utilities, Loan payments (loan must have been on the books prior to Feb. 15, 2020)
- SBA will waive all borrower and lender fees for participation in the PPP Loan program
- Waives Collateral and personal guarantee requirements under this program.
- Sets a maximum interest rate of 4%
- Allows for complete deferment of payments for 6 – 12 Months
- SBA will provide lenders with a process fee for all loans. – Borrower pays no fees.
- Loan forgiveness will be granted if business retains 75% of their previous payroll (that was used to calculate the amount of the loan).
- A “good faith certification” that businesses will use the funds to retain workers, maintain payroll, and pay for rent and similar expenses will be required
- These loans PPP will be applied for directly through your bank or credit union (Starting on Friday April 3rd, 2020).
- Any Remaining balance after the forgiveness will have a maximum maturity of 10 years.
SBA Economic Injury Disaster Loans (EDIL)
- Available to Small Businesses with fewer than 500 employees
- Loans up to $2 Million
- This loan is not tied to payroll.
- Interest rate is 3.75% (No payments for the 1st12 Months, Interest still accrues)
For the EDIL Loans: You would apply on line HERE.
Please review the “The Small business owners guide to the Cares Act” to see the differences between The PPP Loan and the EDIL Loan. We understand that each individual circumstance is different wanted to relay that both programs are available to small business. Should you have any questions regarding which loan is better for you, please contact us after reviewing the attached info.
State of Michigan Grants Program
In addition to the above mentioned loans, there are available grants within each county in the State of Michigan. Here is the website. Please review and see what might apply. All these programs are fluid and their requirements are subject to change and availability of funds.
I urge everyone to please state safe and contact me regarding any question on these loan programs or anything else.
Joe Abro, CPA
Abro & CO., CPA, PC
30600 Northwestern Hwy., Suite 310
Farmington Hills, MI 48334
Tel (248) 671-1040
Fax (248) 671-2772