OMNIBUS CARES ACT-amends the Small Business Act (SBA) to create a new Business Loan Program category (hereinafter, the “program”). For the period from February 15, 2020 to June 30, 2020 (covered period), the law allows the Small Business Administration to provide 100% federally-backed loans up to a maximum amount to eligible businesses to help pay operational costs like payroll, rent, health benefits, insurance premiums, utilities, etc.
It provides thatSBAmay guarantee loans under this program on the same terms, conditions, and processes as a loan made under theSBA’s current Business Loan Program. No collateral or personal guarantee is permitted to be required for a loan. The interest rate on loans under the program is not to exceed four percent.
TheSBAwill provide loans directly or in cooperation with your authorized local bank. Lenders authorized to make loans under theSBA’s current Business Loan Program are automatically approved to make and approve loans under this new program.
Funds may be used for:
Paycheck Protection Loans ("PPL")to cover payroll costs, interest costs, rent, and utilities;
Economic Injury Disaster Loan Grantsto provide an 'immediate' advance of up to $10,000.00 of working capital to businesses that have applied for Economic Injury Disaster Loans in response to coronavirus; and
General Loan Terms:
With some exceptions, businesses eligible for these loan programs will include those with no more than 500 total employees (regardless of full time or part-time basis) and businesses of a size standard in the industry based uponSBAstandards. This includes sole-proprietors and independent contractors, and other self-employed individuals are eligible for these loans. The maximum loan amount is capped at $10 million and will equal to 2.5 times the business's monthly payroll costs.
Loan funds can be obtained and forgiven when used to cover payroll costs, interest on mortgage obligations, rent, and utilities.Under the PPL program, businesses can re-hire employees they had initially laid off, as long as they can demonstrate to the lender that they were in business before February 15, 2020, and that the employee was formerly on the payroll.
Lenders will not require collateral or any personal guarantee as security for these loans, and the interest rate cannot exceed 4%. Additionally, prepayment penalties are not allowed. The only instance in which a lender will have recourse against any individual, shareholder, member, or partner of a borrower would be when the loan proceeds are used for an unauthorized purpose.
The typicalSBArequirement that borrowers not be able to obtain credit elsewhere will also be waived.
In addition to this new loan program, certain applications can be made for loan payment deferments, extensions for maturity dates, etc., on most existingSBAloans during this COVID-19 declared emergency period.