Never has so much been given with so little information or effort…as part of the CARES Act, Congress has enabled the SBA to issue 100% federally guaranteed loans to businesses and entities in operation on February 15, 2020. These loans have been given to small business concerns, non-profits, individuals operating as sole proprietorships, eligible self-employed individuals and Tribal concerns through participating banks with no credit risk to the banks.
Considering the enormity of the project and related processes, the SBA has done and continues to do an outstanding job of working with the participating banks in establishing the processes for determining and getting the money in the bank account(s) of literally millions of companies under what is being called the PPP (Paycheck Protection Program). The maximum loan is the average monthly payroll costs incurred during the 12-month pre-funding period multiplied by 2.5 (250%). The maximum loan is around $10 million. The terms and conditions are historically unheard of for government loans (grants):
- NO GUARANTEE – No personal guarantee required.
- NO COLLATERAL REQUIREMENT NON-RECOURSE – The SBA has no recourse against any individual shareholder.
- NO FEES – The SBA will not collect a fee from the recipient of the loan.
- COMPLETE PAYMENT DEFERMENT RELIEF of principal, interest and fees for a period of not less than 6 months and not more than a year.
- FOR AMOUNTS NOT FORGIVEN, the maximum loan term in 10 years, the maximum rate is 4%, zero loan fees and no prepayment fees.
Based on the rate in which the economy seems to be rebounding, the PPP has served us all very well.