As you are probably aware, as part of the federal government’s stimulus program in response to the COVID-19 pandemic, the U.S. Small Business Administration (“SBA”) will make loans available to businesses that employ fewer than 500 people (generally) through the new Paycheck Protection Program and the existing Economic Injury Disaster Loan (“EIDL”) program. There are many questions about the programs. While we await specific guidance from the SBA, the following is a summary of the respective programs.
Paycheck Protection Program (“PPP”) loans are meant to encourage small businesses to keep their workers employed through the crisis. EIDL loans are meant to help small businesses recover from economic losses sustained because of the pandemic. The PPP and an expansion of the existing EIDL program are part of the Coronavirus Aid, Recovery, and Economic Security Act (“CARES Act”) that was approved by Congress and signed by the President on March 27, 2020. Under each program, the SBA reviews each loan application on a case-by-case basis and considers the specific circumstances of each applicant.
What remains to be seen is how fast the SBA responds to what is sure to be an overwhelming number of requests to obtain loans under these programs. As with all aspects of COVID-19, this is a fluid and rapidly changing environment and SBA loan applicants should closely monitor developments.
We will continue to provide updates regarding legislation enacted in response to COVID-19. Please do not hesitate to contact Barrick, Switzer, Long, Balsley & Van Evera, LLP with any questions.