We have received a lot of questions about these loans from our clients so we went ahead and asked our accounting firm to explain what is coming in plain language we can all understand.  We hope this can help some of our clients get a better understanding of at least one component of the new act. Here is his response:

The following are going to be the two kinds of loans available to small business under the act.  It is one of the loans or the other, not both  We have very little information on the first one, as far as applying, but we now know the exact calculation of what you are eligible for

Small Business Interruption Loans (Forgivable loans related to COVID_19)

The loan is calculated by taking the average costs you have from the prior twelve months of payroll and payroll costs (such as health insurance), mortgage or rent, utilities and any interest on loans that you had prior to the outbreak.  Once you calculate the average for the prior 12 months, you multiply that number by 4 and that is that is the amount that you are eligible for in a loan.  There are no payments or accrued interest for the first twelve months and you will be relieved of repaying the loan to the extent that the proceeds are used for payroll over the next four months.  Salaries are limited to 100k per year.  We know what information we need to apply and get this loan, but not yet the mechanism for applying.

SBA Economic Injury Disaster Loan Program:

This type of SBA loan has been used before in areas that have been determined to be disaster areas.  Currently all fifty states are considered to be disaster areas for the purpose of obtaining this loan. Here are some parameters. Loans are up to 2m.  Interest rate is 2.75% for non-profits and 3.75% for small business.  Term length is up to 30 years.  You can use this loan for accounts payable, fixed debts, payroll and other bills due to the virus.  This loan can be applied for now https://disasterloan.sba.gov/ela/, but at this point it is my understanding that you can either take this loan or the loan above, but not both.

This is a more traditional loan, where the requirements are going to be business tax returns, and personal financial statements.  Much less specific information that needed for the Interruption loans. 

Questions?  Contact us at (215)355-2121 or:

Mark B. Zinman, CPA
Email: mzinman@thecpa.com
Tel:  215.357.2250
260 Knowles Avenue, STE 334
Southampton, PA  18966