According to a recent ProSales magazine survey, nearly 52% of LBM professionals at small businesses are at least “somewhat worried” that revenue lost due to COVID-19 could force their company to permanently close this year. Fortunately, some help is within reach.
The $2 trillion stimulus bill, Coronavirus Aid, Relief, and Economic Security Relief Act (CARES Act), signed into law in late March, is the largest emergency aid package in U.S. history.
It includes $349 billion in federally guaranteed Small Business Administration (SBA) 7(a) loans through the Paycheck Protection Program (PPP). The PPP also includes $10 billion in SBA grants of up to $10,000 to provide immediate relief for operating costs and $17 billion to cover six months of payments for businesses with existing SBA loans.
Small businesses—companies with 500 employees or fewer—can apply for federally-insured, partially forgivable loans that can cover operating expenses. Borrowers can apply for loans up to 2.5 times the company’s monthly payroll costs for the period between February 15, 2020 and June 30, 2020, or $10 million, whichever amount is smaller. The PPP defines payroll costs as wages, salaries, retirement contributions, and healthcare benefits.
Under the PPP program, loan payments will be deferred for six months and loans include a forgiveness policy that turns a portion of the loan into a grant that does not need to be repaid. Businesses must apply for forgiveness on their loan.
The portion of the loan used to cover the first eight weeks of payroll and certain other expenses can be forgiven if certain criteria are met by the borrower. Forgiveness will be granted if funds are used for payroll costs, interest on mortgages, rent, and utilities. It is also contingent upon employers maintaining or quickly rehiring employees and maintaining salary levels. Loan forgiveness will be reduced if a company’s full-time headcount declines or if salaries and wages for any employee decrease by more than 25%. Businesses that have already been forced to make staffing reductions are still eligible to qualify for loan forgiveness if they rehire and reach precrisis employment levels by June 30, 2020.
For amounts not forgiven, the maximum loan term is 10 years and the maximum interest rate is 4%, with no loan fees or prepayment fees.
To qualify for loans, businesses must certify that the current economic conditions caused by COVID-19 necessitate a loan to support ongoing business operations. Borrowers can apply for PPP loans at more than 1,800 banks that offer SBA loans.
Funding for the program will be administered on a first-come, first-served basis. Further information about the PPP is available at the SBA’s website.
Several regional dealer associations offer information and resources to members to help identify appropriate business loans.
“This is a complicated time in our history, and there seems to be a lot of misinformation out there. The association execs are working as a team across national, regional, and state lines to work toward the best resolution and mitigation throughout all of this,” said Dena Cordova-Jack, executive vice president of the Mountain States Lumber and Building Material Dealer Association.
The SBA is also increasing disaster assistance through its Economic Injury Disaster Loans (EIDL) and Grants. Businesses can receive a $10,000 cash advance within three days of applying for an EIDL of up to $2 million. The advance under this program does not need to be repaid and may be used to keep employees on payroll, pay sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations. Applications for EIDLs are available on the SBA’s website.
