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Cutting through the Corona-19 confusion: SBA loan guidance
Although the Stimulus package was approved, there is still a great deal of confusion in the financial marketplace for businesses impacted by the coronavirus. Find out in this part one of two-part series which SBA program may work best for your business.
April 2, 2020 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times
Businesses looking for financial relief from the impact of the coronavirus pandemic naturally welcomed President Trump's signing of the $2 trillion stimulus package this past weekend.
For the past few weeks, tens of thousands of companies, including those in the ATM marketplace, have been forced to lay off workers, not knowing when the stay-at-home mandates and other safety measures will be lifted.
One of the most welcome provisions was a $349 billion paycheck protection program designed to provide small companies funds to retain their payrolls. A program many ATM operators were hoping for.
Borrowers with less than 500 employees can apply for up to $10 million. For any loan amounts not forgiven, the maximum will have a maturity of two years and a 0.5% interest rate. There are no loan fees or prepayment fees.
That's the good news. The bad news is that details aren't final and finding out how to secure those funds hasn't been easy.
The ATMIA trade organization is optimistic that the federal help extended by the SBA will assist many of its members suffering from revenue shortfalls.
"The independent ATM deployers (IADs) are facing multiple challenges resulting from the social distancing, 'shelter in place', and business closing mandates being issued at state and local levels," said David Tente, executive director for the U.S. and Americas. "As you might expect, this makes a large percentage of most independent ATM fleets inaccessible — at much as 90% for some operators. And if a 90% hit on revenue isn’t challenging enough, all of the static network fees are still being assessed. Once these programs are finally up and running, they will be a huge lifeline for the industry, allowing IADs to quickly restore consumer access to cash when the restrictions begin to be lifted."
Here is what we know, so far
The Treasury Department announced Tuesday that borrowers may apply for loans on April 3 to cover payroll and other expenses through existing Small Business Administration lenders.
A list of lenders is supposed to be available at the SBA website, www.sba.gov, but PNC — a bank planning to provide loans for the paycheck protection program loans — told this website Tuesday that the applications were not yet available.
That isn't preventing many business owners from trying to take advantage of the paycheck protection program. What makes it appealing is that the loan is potentially 100% forgivable, said John Fekete, a partner at Baratz & Associates P.A., a Marlton, New Jersey-based accounting firm.
"You can get a $5 million loan as long as you do the right thing — pay your employees, hire everybody back at a certain date," Fekete said during an interview with this website."That $5 million loan gets wiped off the books. And it's a non-taxable event."
Although most of the big banks will participate, Fekete said the problem now is that they are not prepared to accept the applications yet because they don't have all their paperwork together.
"The really small businesses don't have a clue as to what's going on and how to get the resources," he said."We've been hearing from all of our small business clients."
How to get started
Eight weeks of payroll, rent, mortgage and utilities are forgivable under the PPP loan if the employer maintains their payroll, according to the Treasury Department. Small businesses will be able to apply if they were harmed by COVID-19 between Feb.15, 2020 and June 30, 2020.
Businesses wanting to apply should start with their current banks.
"Most likely they're going to be able to help you in this process," Fekete said."The problem is there is a delay between them (the government) passing this law, and then, the SBA giving the banks the proper guidance and regulation to administer the loan application."
According to a summary from Alloy Silverstein, a Cherry Hill, New Jersey, accounting and advisory firm, PPP loan applicants will need to provide documentation verifying the number of employees and pay rates, unemployment insurance, IRS and state tax filings.
Which loan(s) is best for my business?
Up until Tuesday's Treasury Department announcement, potential borrowers could easily confuse the PPP loans with other SBA loans designed to provide COVID-19 relief, such as Economic Injury Disaster Loans. Those launched in January and have a $2 million limit.
Business owners could easily be misled by a section of the SBA website under the heading, "Disaster Loan Assistance" containing the subhead," COVID-19 Economic Injury Disaster Loan Application."
Although both the disaster loans and the paycheck protection program are SBA mechanisms to help companies weather the COVID-19 outbreak, the EIDLs are better for businesses that have discontinued operations, said Angela Venti, director of practice growth at Alloy Silverstein.
No payment is due on the low-interest loans for 12 months from the time they originate, and companies are eligible if they have been in operation since Jan. 31, 2020.
In addition, borrowers cannot use a PPP loan for the same purpose as other SBA loans, but it ispossible totake advantage of both the PPP and EIDL loans.APPP can be used for short term working capital, i.e., employee wages and operating costs, and an EIDL, which is long-term debt, can be used for store renovations and growth-oriented initiatives.
What is an Emergency Economic Injury grant?
The SBA is also offering COVID-19 relief through Emergency Economic Injury grants, which provide an emergency advance of up to $10,000, Venti said.
To get the emergency economic industry grant, the borrower must first apply for the EIDL and request the advance, which does not need to be repaid and can be used to cover payroll cost, expenses caused by supply chain disruptions, debts, rents and mortgage payments. The emergency grants are available through Dec. 31, 2020. Those who have already applied for EIDLs are eligible for the grants, which are backdated to Jan. 31, 2020.
Borrowers who have already taken SBA loans are being notified the SBA is waiving six months' worth of principal and interest, Venti said.
"If you already have a loan with them (the SBA), they will make six months' (worth) as a grant," she said."It's literally six months of a breather."
It is also possible to take the emergency grant and apply for a loan, Venti said.
"The SBA will know that you received the $10,000 (emergency grant), but it does not exclude you then applying for the economic injury (disaster loan)," she said."That (grant) will be an immediate relief."
The grants will process faster than the loans because there's been such a large number of loan applications, according to Venti.
Businesses that took out an Economic Injury Disaster Loan between Feb. 15 and June 30 can also refinance the EIDL loan into a PPP loan, she said.
Whatever role your business plays in the ATM Marketplace, if your business has been impacted by the coronavirus pandemic it's time to get up to speed on the various SBA programs and get your applications in now.
Editor's Note: This is part one of a two-part series. Part two will explore additional loans and benefits under the CARES Act.
For the latest updates on how the coronavirus is affecting the ATM marketplaceclick here.
About Elliot Maras
Elliot Maras is the editor of Kiosk Marketplace and Vending Times. He brings three decades covering unattended retail and commercial foodservice.
Included In This Story
ATM Industry Association (ATMIA)
The ATM Industry Association, founded in 1997, is a global non-profit trade association with over 10,500 members in 65 countries. The membership base covers the full range of this worldwide industry comprising over 2.2 million installed ATMs.
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