Small Business Debt Relief Program

On March 27th, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. This $2 trillion package includes two key provisions to provide support for America’s small businesses:

Small Business Debt Relief Program

This program will provide immediate relief to small businesses with non-disaster SBA loans. The SBA will cover all loan payments on SBA 7(a), 504, and microloans, including principal, interest, and fees, for six months.

Specifically, the CARES Act requires the SBA to pay the principal, interest, and associated fees for:

• Covered loans made before March 27, 2020 and on deferment, for 6 months, beginning with the next payment due after the deferment period.
• Covered loans made on/within 6 months beyond March 27, 2020 for 6 months beginning with the first payment due.
• The 504 Loan Program Central Servicing Agent will not apply an ACH debit to current borrower’s accounts to cover the loan payments due on April 1, 2020, for all 504 loans in regular servicing status. The SBA will continue to make these loan payments to the CSA for the 6 month period beginning April 1, 2020.

Additionally, while not mentioned in the CARES Act, SomerCor encourages borrowers with current conventional loans to consider the SBA 504 refinance program to help their business. The refinance program provides a path for small businesses to lower their monthly mortgage payments and receive a cash-out portion to help cover a variety of expenses.

To learn more about the SBA 504 refinance program at SomerCor, check out the success story of a refi client.

Paycheck Protection Program (PPP)

The CARES Act makes temporary changes to the SBA 7(a) loan program by providing a 100% loan guarantee for SBA PPP loans of up to $10 million per small business.

• Small businesses and sole-proprietorships can apply on April 3, 2020. On April 10, independent contractors and self-employed individuals can apply.
• Loans can be used for payroll support, such as employee salaries, paid sick or medical leave, insurance premiums, and mortgage, rent, and utility payments.
• Waives collateral and personal guarantee requirements as well as the credit elsewhere test for funds.
• Eligible businesses must have been operating on February 15, 2020, and the borrower must provide a lender with a good faith certification of need.
• PPP provides loan forgiveness of up to 8 weeks of payroll based on employee retention and salary levels.
• No SBA fees, and at least six months of deferral with maximum deferrals of up to a year.
• For any amount not forgiven, the maximum term is 10 years at a maximum interest rate of 4%.
• Entities will be eligible to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020. This program would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls.
• Loans are available through June 30, 2020.

These loans will be administered by lenders certified by the SBA who have selected to participate in the program. The U.S. Department of Treasury provided the following guidance and sample application to help prepare:

PPP Guidance for Lenders
PPP Guidance for Borrowers
Sample Paycheck Protection Program Application

For borrowers interested in utilizing the PPP loan, now is a great time to collect the following documents:

• Financial statements – Interim 2020 income statement and balance sheet and full year 2019 income statement and balance sheet.
• Tax Returns – last three (3) years of federal returns for business.
• 2019 payroll information.
• Current organizational documents – Bylaws, articles and operating agreements.
• General liability insurance information.
• Current building lease & any amendments.

Please be sure to forward this information along to interested parties. Due to the swiftly changing nature of this situation, SomerCor will be sending an increased number of communications to ensure our community has the most updated resources. If you have any questions, please do not hesitate to reach out directly to your SomerCor contact for additional information. Our main e-mail at hi@somercor.com is also available for general inquiries.