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Small Business Administration (SBA ) Programs

The SBA has established two programs to meet the needs of eligible businesses impacted by COVID-19: 7(a) Paycheck Protection Program and 7(b) Economic Injury Disaster Loan (EIDL). Read more about the details of these two progressive programs below.

SBA 7(b) Economic Injury Disaster Loan (EIDL)

The 7(b) loans provide up to $2 million in assistance with an interest rate of 3.75% for-profit companies and an interest rate of 2.75% for non-profits. The loan terms range up to 30 years, and there are no upfront fees or early payment penalties. The loan includes an emergency advance of up to $10,000.

 

EIDL Program Overview Information  

  • Loans up to $2MM
  • Interest rates as low as 3.75% for small businesses and 2.75% for non-profits
  • Terms up to 30 years
  • Payments start 12 months after the date of the contract
  • Funds can be used for business expenses such as pay sick leave for employees who are unable to work due to a direct effect of COVID-19, payroll, materials, rent or mortgage payments, repaying outstanding obligations
  • Collateral may be required for loans of $25,000. SBA will not decline a loan from lack of collateral but will require pledges when available

 

Eligibility Requirements

  • Must have a physical presence within the declared disaster area
  • Must be an independently owned and operated business 
  • Must not have available credit elsewhere (subject to review)
  • Loans for any business that is affected by COVID-19, has less than 500 employees and was in operation before February 1, 2020, is eligible to apply 
  • Businesses must apply before December 31, 2020

 

Emergency Advance Information

  • There is no requirement to repay the advance even if your business is denied the 7(b) loan
  • Funds can be used to pay business expenses such as pay sick leave for employees who are unable to work due to a direct effect of COVID-19, payroll, materials, rent or mortgage payments, repaying outstanding obligations

 

Ineligible Entities 

  • Agricultural Enterprises (  business activities as defined in Section 18(b) of the Small Business Act)
  • Religious Organizations
  • Gambling Concerns 

 

Ineligible Uses 

  • Dividends and bonuses 
  • Disbursement to owners, except when directly related to the performance of services
  • Repayment of stockholder loans, except when the funds were injected on an interim basis because of the disaster and non-repayment would cause undue hardship to the stockholder/principal
  • Repair or replacement of physical damages
  • Paying down or paying off company debt
  • Payment of any part of a direct federal debt (including SBA loans) except IRS obligations
  • Relocation

 

Free Application Assistance From the SBA

Free assistance with reconstructing financial records, preparing financial statements and submitting the loan application is available from any of SBA’s partners: Small Business Development Centers (SBDCs), SCORE, Women’s Business Centers (WBC), and Veteran’s Business Outreach Centers and local Chambers of Commerce.  To locate your nearest office visit https://www.sba.gov/local-assistance

 

Partner with IBS, N.A.

Birthed out of the 2008 Financial Crisis, IBS,N.A. has supported hundreds of small and middle-market companies in overcoming market volatility. IBS,N.A. has the balance sheet and advisory capacity to partner with you. Whether it includes restructuring your balance sheet, deploying capital to fuel your supply chain, negotiating with creditors, or leveraging our capital markets partners, our team is here for you. To discuss partnering with IBS, N.A. contact your local relationship manager or email us at engage@myinstitutionalbaking.com

 

SBA 7(a) Paycheck Protection Program (PPP)

 This is an expansion of SBA traditional working capital loan which assists small businesses in covering operating expenses. Businesses can use 7(a) loan proceeds to pay-off a 7(b) Economic Injury Disaster Loan. Please note, a business can have both a 7(a) and 7(b) loan at the same time.

 

PPP Loan Program Overview

  • Loans available to businesses impacted between February 15, 2020, through June 30, 2020.
  • No personal guarantee
  • No prepayment penalty 
  • Low fixed rate with a term of up to 2 years
  • Loans must be used to (1) retain workers (2) maintain payroll; pay rent or mortgage interest payments; interest or debt obligations entered prior to the recovery period; and or make utility payments
  • 75% of the loan amount provided must be used to cover payroll, limiting a maximum of 25% of proceeds for mortgage interest payments, rent, and utilities
  • Businesses can apply for a loan of 2.5x average monthly payroll costs up to $10MM
  • The PPP provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Payroll costs are capped at $100,000 on an annualized basis for each employee
  • Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors—are eligible to apply. Businesses with more than 500 employees are eligible in certain industries.
  • Loan payments will be deferred for 6 months
  • Neither the government nor lenders will charge small businesses any fees

 

 

7(a) PPP Loan Forgiveness

Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

 

  • Loan forgiveness may be reduced if:
    • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount
    • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019
    • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020

 

Request PPP Loan Forgiveness

  • A small business can submit a forgiveness request to its lender that is servicing the loan.
  • Requests should include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations.  
  • Companies must certify that the documents are true and that the business used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. 
  • The lender is required to make a decision on forgiveness within 60 days of a complete request.

Preliminary Checklist for Paycheck Protection Program 

  • 2019 Business Tax Returns or Year-End Financial Statements as of 12/31/2019
  • 2019 Payroll Cost and YTD Payroll Cost through February 15, 2020
  • Number of employees as of December 31, 2019
    Number of employees as of February 15, 2020 
  • Confirmation of company industry category 

 

Payroll Expense Verification Documents Required

  • IRS Form 940 Employers Annual Federal Unemployment Tax Return (FUTA) 
  • IRS Form 941 Employer’s QUARTERLY Federal Tax Return 
  • Payroll Summary Report 2019 with corresponding bank statements (W2 Summary/1099 Summary)
  • Breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.) 
  • Copy of 2019 1099s (if Independent Contractor) 
  • Copy of 2019 W2s for wage earners 
  • Trailing twelve-month profit and loss statement (as of the date of application) for all applicants 

 

Free Application Assistance From the SBA

Free assistance with reconstructing financial records, preparing financial statements and submitting the loan application is available from any of SBA’s partners: Small Business Development Centers (SBDCs), SCORE, Women’s Business Centers (WBC), and Veteran’s Business Outreach Centers and local Chambers of Commerce.  To locate your nearest office visit https://www.sba.gov/local-assistance

 

Partner with IBS, N.A.

In 2012, IBS,N.A. launched its Banker Participation Program and its progressive fintech-based Banker Portal® to support depository institutions and SBA preferred lenders with financing participations, transactional support, streamlined bi-lateral referrals, and special assets financing. What does that mean for you?  IBS,N.A. maintains active agreements with over 85 depository banks and Preferred SBA Lenders capable financing your PPP request.  

 

To discuss partnering with IBS, N.A. contact your local RM or email us at

engage@myinstitutionalbaking.com.  To be considered as a PPP client under IBS N.A.’ SBA Agency Program click the button below.

 

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Email: originations@myinstitutionalbanking.com

 

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