News & Trends
April 3, 2020

Everything You Should Know About the SBA Programs Available Through the CARE Act

As a small business owner or someone who is self-employed, you may find yourself in unchartered territory with the current pandemic that’s affecting so many small businesses. Luckily, as of March 27th, the CARES Act – or Coronavirus Aid, Relief, and Economic was signed into law to provide relief and economic aid to individuals and businesses facing financial struggles and instability.

You’ve probably got a lot on your plate and don’t have a lot of time to decipher these loan programs and figure out how they can help you, so we’ve compiled everything you need to know right here so you can figure out which program is right for you.  

Paycheck Protection Program (PPP)

The Paycheck Protection Program is a federally guaranteed loan program that helps businesses and nonprofits cover up to 8 weeks of payroll and some other expenses up to $100,000/year per employee. Businesses can apply for 2.5 times their average monthly payroll costs up to $10 million. This number is based off the payroll costs for the previous year.

What Can I Use the Funds For?
  • Payroll
  • Rent
  • Utilities
  • Interest on mortgage payments

As long as a business doesn’t lay off any employees or it rehires by June 30, 2020, these loans can be forgiven. Note that loan forgiveness may be decreased if a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees occurs. Loans may not be forgiven if funds are used for other expenses not as outlined above. Whatever amount may not be forgiven will convert to a fixed two-year repayment.

How do I Know if I'm Eligible?
You are eligible to apply for the PPP if you are one of the following:

  • A small business or nonprofit with less than 500 employees
  • Self-employed
  • A sole proprietor  
  • An independent contractor
  • A gig worker

How Do I Apply?
Applications are just beginning to be accepted. Loans can be applied for by calling your current bank or lender. Here is an example of what you might be able to expect from the application.

Economic Injury Disaster Loan (EIDL)

The EIDL offers both grants and loans, including a $10,000 emergency grant that doesn’t have to be repaid that both business and nonprofits can apply for. This grant will most likely be the fastest way to obtain funds as the SBA states funds will be received within three days of approval. The EIDL also offers low-interest loans that will have to be repaid. Businesses can apply for these loans of up to $2 million in order to cover operating expenses while they experience a lack of revenue. When it comes to repaying the EIDL, the terms are 3.75% for business and 2.75% for nonprofits for up to a 30-year term.

What Can I Use the Funds For?
Unlike the PPP which specifically requires funds to be spent on specific expenses in order to be forgiven, there is more flexibility around what the EIDL funds can be used for. These include expenses such as rent and mortgage, salaries, employee paid leave, and operational expenses. A business cannot, however, use both the PPP and the EIDL for the same purpose.

How Do I Know if I’m Eligible?
The same eligibility for the PPP applies to the EIDL. The applicant also needs to have been in operation on January 31, 2020 and been negatively economically impacted due to COVID-19.

How Do I Apply?
The application for the EIDL is now live and can be found here. While the application is for the loan, there is a spot for you to indicate you also want the $10,000 emergency grant.

How Do I Know Which Program is Right for Me?

First, assess the eligibility requirements described above to determine which program you are eligible for. Bear in mind that the PPP can be entirely forgiven as long as the requirements are met, while the EIDL must be paid back in its entirety except for the $10,000 emergency grant.

You may apply for both programs but remember not to use the funds for the same purpose.

Important Note: Homestead does not grant or finance any of these loans and we have no control over qualification guidelines.  This information is merely provided as a guide, as we may feel this could help many of our borrowers and referral partners at this critical time.  This information and the details and/or loan availability may change at any time.  Please visit sba.gov to find a lender and for up to date information.