SBA loans can be originated locally
April 8, 2020
Sheila Harris
Small businesses - including family-owned “mom & pop” shops, industries with less than 500 employees, and charitable organizations - are finding themselves impacted by the crushing economic ramifications of required social-distancing in the face of COVID-19.
Help is prospectively on the way in the form of Small Business Administration loans. For businesses with less than 500 employees, loans can be originated through local banks designated as approved SBA lenders.
“For businesses who need to pay employees, a SBA Payroll Protection Loan may be the stop-gap measure needed to meet payroll,” Kelley said.
“Business owners can contact their local bank, provided it’s an SBA-approved lender, and fill out an application for the loan. This particular type of loan will cover a company’s payroll for an eight-week payroll period, ending June 30, providing they meet the qualifying criteria. The loan proceeds a company is eligible for are based on its average monthly payroll, times 2.5,” Kelley explained. “For example, a company with an average payroll of $10,000 per month would be eligible for a total loan amount of $25,000.”
“In order to be eligible, a company must also provide a verifiable number of employees who are being paid,” Kelley continued. “At the end of the two-month term (June 30), they follow up with their bank of loan origin to verify their current number of employees and the amount they were paid. If they can verify loan proceeds were used to meet payroll - their loan should be forgiven by the SBA.”
“The key,” Kelley explained, “is to retain employees. With this type of loan, 75 percent of loan proceeds must go toward payroll; 25 percent can be used toward other expenses: rent, utilities, etc.”
Freedom Bank is giving their customers priority service when originating SBA loans.
“Even so, we’re working overtime,” Kelley said.
He suspects other local banks are doing the same.
An alternative to Payroll Protection Loans are Economic Disaster Injury Loans, which can be applied for directly through the Small Business Administration website at www.sba.gov. Direct loans may be extended for a 30-year term for qualifying businesses, with current interest rates of 3.75 percent for small businesses, and 2.75 percent for non-profit organizations, according to Jovita Carranza of the Small Business Administration.
For more information about direct SBA loans, or to apply online, applications may be downloaded at https://disasterloan.sba.gov/ela. Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov. Individuals who are deaf or hard of hearing may call (800) 877-8339. Completed applications should be mailed to U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
Sheila Harris
Small businesses - including family-owned “mom & pop” shops, industries with less than 500 employees, and charitable organizations - are finding themselves impacted by the crushing economic ramifications of required social-distancing in the face of COVID-19.
Help is prospectively on the way in the form of Small Business Administration loans. For businesses with less than 500 employees, loans can be originated through local banks designated as approved SBA lenders.
“For businesses who need to pay employees, a SBA Payroll Protection Loan may be the stop-gap measure needed to meet payroll,” Kelley said.
“Business owners can contact their local bank, provided it’s an SBA-approved lender, and fill out an application for the loan. This particular type of loan will cover a company’s payroll for an eight-week payroll period, ending June 30, providing they meet the qualifying criteria. The loan proceeds a company is eligible for are based on its average monthly payroll, times 2.5,” Kelley explained. “For example, a company with an average payroll of $10,000 per month would be eligible for a total loan amount of $25,000.”
“In order to be eligible, a company must also provide a verifiable number of employees who are being paid,” Kelley continued. “At the end of the two-month term (June 30), they follow up with their bank of loan origin to verify their current number of employees and the amount they were paid. If they can verify loan proceeds were used to meet payroll - their loan should be forgiven by the SBA.”
“The key,” Kelley explained, “is to retain employees. With this type of loan, 75 percent of loan proceeds must go toward payroll; 25 percent can be used toward other expenses: rent, utilities, etc.”
Freedom Bank is giving their customers priority service when originating SBA loans.
“Even so, we’re working overtime,” Kelley said.
He suspects other local banks are doing the same.
An alternative to Payroll Protection Loans are Economic Disaster Injury Loans, which can be applied for directly through the Small Business Administration website at www.sba.gov. Direct loans may be extended for a 30-year term for qualifying businesses, with current interest rates of 3.75 percent for small businesses, and 2.75 percent for non-profit organizations, according to Jovita Carranza of the Small Business Administration.
For more information about direct SBA loans, or to apply online, applications may be downloaded at https://disasterloan.sba.gov/ela. Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov. Individuals who are deaf or hard of hearing may call (800) 877-8339. Completed applications should be mailed to U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.