Summary of Small Business Loan and Funding Sources

March 31, 2020

As the coronavirus pandemic has left businesses scrambling to respond to revenue loss, both the federal and PA state government have announced programs to help businesses survive the crisis. As information and the final details of these programs have been evolving, it can be difficult for the average business owner facing a variety of challenges to keep up.

To help our customers decipher information that is circulating, Ephrata National Bank is providing a summary of some currently announced and available programs that could be potential sources of emergency funding for your business. Please keep in mind that the unique facts of your business’s financial condition will dictate what, if any, programs your business will qualify to receive.

PA Industrial Development Authority (PIDA) COVID-19 Working Capital Assistance Program (CWCA)

This program, which we’ve also seen referenced as the PIDA Working Capital Access Program, makes $60 million in favorable working capital loans of up to $100,000 available to vulnerable, impacted businesses with less than 100 full-time employees. Information on this program began to be widely disseminated last week and the application period opened on March 25. Not surprisingly, an extraordinary number of applications were submitted and as a result, the Certified Economic Development Organizations (CEDO) charged with reviewing applications and processing loans are not accepting any more. If you have an application in process, expect to hear from them soon. If you have not submitted an application, the following federal loan programs can potentially provide assistance.

Coronavirus Aid, Relief and Economic Security Act (CARES Act)

Federal assistance to small businesses comes primarily as a result of the CARES Act which President Trump signed into law on March 27. The act includes the following programs designed to help businesses during the COVID-19 pandemic.

Paycheck Protection Program:  Title 1 of the CARES Act is the Keeping Workers Paid and Employed Act which creates the Paycheck Protection Program (PPP). It provides $349 billion in “paycheck protection loans” to small businesses so they can maintain their existing workforce and pay obligations. Small businesses are defined as businesses with less than 500 employees with the definition also including sole proprietorships, self-employed individuals, non-profits and independent contractors. Uses of the loan include:

  • Payroll Expenses
  • Employee Salaries
  • Mortgage Interest
  • Rent and Utilities
  • Interest on debt incurred before Feb. 15, 2020

Businesses can borrow up to 2.5x their payroll based on the 2 month average for the last year plus an additional 25% of that amount. The maximum loan amount is $10 million and the maximum interest rate is 1% fixed. Loan repayment terms are up to 2 years. Borrowers can pay off early without penalty. Loan payments will be deferred for the first 6 months but interest will accrue over that time. There are no collateral requirements, personal guarantees or borrower fees. Businesses that maintain their workforce at their current compensation levels will be forgiven for the portion of loan proceeds that are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period the loan is made. Up to 100% of the loan is forgivable but it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. The deadline for loan applications is June 30, 2020, but because there is a funding cap, borrowers are encouraged to apply as soon as possible. To apply, complete the Paycheck Protection Program Loan application found HERE and submit with the required documentation to an approved lender. As an existing SBA lender, Ephrata National Bank can take your application. You will need to provide payroll documentation.

SBA Economic Injury Disaster Loan (EIDL):  The CARES Act expands the SBA Economic Injury Disaster Loans program to provide small businesses with working capital loans of up to $2 million. In addition, small businesses can apply for an advance of up to $10,000. The loan advance will provide economic relief to small businesses that are currently experiencing a temporary loss of revenue. Advanced funds will be made available within 3 days of a successful application and do not have to be repaid. Uses of this loan are operating costs which can include:

  • Payroll
  • Fixed Debts
  • Accounts Payable
  • Other expenses that can’t be paid because of the disaster’s impact

The interest rate on the loan is 3.75% on terms up to 30 years. This loan is not eligible for forgiveness.

Businesses wishing to apply for an Economic Injury Disaster Loan can do so directly through the SBA using their online application.

SBA Debt ReliefThis program provides relief to small businesses with 7(a) loans. If the loan is current, SBA will pay the principal and interest for a period of 6 months.

SBA Express Bridge Loans:  These loans allow small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000. These loans come with less paperwork and are designed to help small businesses overcome the temporary loss of revenue. They can also serve as a stop gap measure while applying for an Economic Injury Disaster Loan.

Ephrata National Bank is an SBA approved lender and your ENB Relationship Manager is ready to assist you in putting your best foot forward. By compiling and making available accurate and complete financial records, you can speed the process and ensure appropriate and timely applications. As always, you are encouraged to seek independent accounting and legal advice on decisions that require such professional reviews and to assist you in determining your priorities.

To get started, please contact your Commercial Loan Relationship Manager or call us at (877) 773-6605. For additional information, we recommend referencing the SBA’s Small Business Relief Options.

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