Changes To The Ppp Made By The Consolidated Appropriations Act 2021
The Consolidated Appropriations Act, 2021 provides $284 billion in new PPP loan funding through March 31, 2021, including special set-asides for companies in depressed areas and those with 10 or fewer employees.
The legislation provides first-time forgivable PPP loans of up to $10 million for qualifying companies with 500 employees or fewer and second-draw loans of up to $2 million for previous borrowers with 300 or fewer employees.
If you return all or part of your PPP loan, then you may reapply for the maximum amount applicableprovided you have not already received forgiveness. Further, if you would be eligible for a higher loan amount due to interim final rule changes, then you can work with your lender to modify the amount of your loaneven after forgiveness.
The list of forgivable expenses has been expanded and now includes:
- Personal protective equipment
- Complying with federal or state health and safety guidelines
- Software, cloud computing, and other human resources and accounting needs and
- Property damage due to public disturbances that took place in 2020 and were not covered by insurance.
Also new, expenses that you pay with PPP loan proceeds are now tax-deductible even if the loan is forgiven. This applies to both first- and second-draw loans.
You can now select a covered period between eight and 24 weeks from when you receive your loan, instead of needing to pick either eight or 24 weeks. Your covered period can extend through March 31, 2021.
Prepare Your Sba Disaster Loan Application
Now that weve reviewed the general eligibility requirements for SBA disaster loans, lets break down the steps that are required to actually apply for one of these loans. On the whole, just like your eligibility requirements depend on the individual loan that youre looking to apply for, some of the application processes also depend on the specific loan. This being said, however, each of the loans that are part of the official SBA disaster loan programâthat is all of the loans weve discussed with the exception of the Express Bridge loanâfollow a very similar process.
With this in mind, there are three ways you can apply for an SBA disaster loan:
- Online: According to the SBA website, using the online application is the fastest method to receive a decision about your loan eligibility.
- You can complete a paper application and submit it by mail.
- In-person: You can apply for one of these loans in-person at any Disaster Recovery Center and receive one-on-one assistance from an SBA representative.
To submit your application, youll be required to provide a handful of information and documents about your business and yourself .
Understand How Small Business Loans Work
Its important to conduct research to fully learn and understand how business loans work, so youre not caught off-guard by any part of the process, any additional fees, etc.
Essentially, small business loans work as followed:
- There are companies, called lenders, that specialize in lending money to businesses,
- Lenders make money by charging interest and fees to businesses that borrow money from them.
- There are several types of business loans, and different lenders have different requirements.
- There are also different loan repayment types.
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Sba 7 Eligibility Requirements
If youre looking for support from the SBA, theyve got some requirements youll need to make sure you meet:
You must be officially registered as a for-profit business, and you must be operating legally.
As the business owner, you cant be on parole.
Your business must have fewer than 500 employees, and less than $7.5 million revenue on average each year for the past three years
Your net income must be under $5 million , and your tangible net worth must be less than $15 million.
You must show youre investing your own time and money into the business, having invested equity.
Your business must be physically based in the United States, and you must be doing business with the U.S. and its territories.
Your small business must be in an SBA-eligible industry . Learn more about Eligible and Ineligible Industries for SBA 7 Loans
Youll need to show that youve already tried and failed get funds from other financial lenders, fully exhausting non-SBA loan options.
Youll need to prove youve got a sound business purpose for the loan youre requesting, and that your intended funds usage is approved by the SBA.
Youll need to prove youre not delinquent on any existing debts to the U.S. government .
Additional Beneficial Business Qualities
In addition to the eligibility requirements, there are a few additional qualities which can increase your likelihood of SBA 7 loan approval.
A good credit score – preferably above 680.
A history free from recent bankruptcies, foreclosures, or tax liens.
Having been in business for at least two years.
The ability to provide collateral for loan requests over $25,000.
The ability to make a down payment of 10% if your intended use of funds is to purchase a business, commercial real estate, or business-related equipment.
Sufficient cash flow to meet your debt obligations.
Sufficient working capital .
Good character according to the SBA .
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Fill Out The Application
The rules for applying are pretty much the same whether youre sitting in an office somewhere with pen and paper or typing on your computer from home. Filling out the application may take time, but thanks to the documentation you gathered in step 5, it wont be nearly as laborious as it might have been. Once youve done it, expect to wait between 24 hours and six months depending on the loan type you chose.
How Can Funds From An Sba Express Loan Be Used
The SBA enforces limitations on how a business owner can use the funds provided. The funds must be used in accordance with the guidelines for SBA 7 loan usage. That said, SBA loans are well known to cover a wide variety of central business activities, making them an invaluable resource for any small business.
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Qualification Requirements For Sba Loans
Qualifying for an SBA loan requires some documentation, but qualifications may not be as stringent as typical bank loans. If youre not sure whether you will qualify, here are some points to consider for non-COVID-focused loans.
- Years in business. The SBA wants to work with established local businesses, which means being in business for a minimum of roughly two years. There are some loan offerings for startups, but you will have to speak directly with an SBA expert to understand whether your new business can qualify.
- If youre applying for a loan, theyre going to check both your business and personal credit. While every situation is different, the general rule is that a credit score of 620 or higher is needed to acquire an SBA loan.
- Annual revenue. The SBA wants to see that your business is healthy and that youre driving revenue. You may not need to be profitable, per se, but you likely will need at least $100,000 in revenue each year to qualify. Again, this can vary based on your specific situation, but the key here is that your business needs to be established, healthy and capable of repayment.
Depending on the lender, there may be other requirements. It is very important to be transparent with your lender and determine what works best for your business.
SBA loans can be ideal for working capital, property loans and disaster relief.
Transcript: Applying For An Sba Loan
If you currently own a small business or plan to start one, you’ve no doubt heard about SBA loans. You probably know that they’re business loans that are guaranteed by the U.S. Small Business Administration. You may also be wondering about the actual process of getting an SBA loan.
Hi, I’m Chris Ledesma with Wells Fargo’s SBA team.
Today I’d like to help you understand how to take advantage of this program.
The best tip I can give you is this: A knowledgeable banking team can make securing a loan as simple and as easy as possible.
At Wells Fargo, our goal is to help guide you through every step of the process so you have a positive experience. We have trained people, resources, and a lot of experience to make that happen.
Now, let’s get started with a walk-through of the SBA loan process.
Step one is the application process, in which you complete and collect all the application paperwork and the required documentation. Step two is the underwriting process, when the bank analyzes your application and makes a decision. And step three is the closing process, when you supply the final documentation, pay closing costs and fees, and seal the deal. Once closed, that’s when you receive the funds.
Now, let’s take a look at each of these steps.
Before you apply, it’s a good idea to talk to an SBA loan officer at a bank to review the different programs and decide which one best meets your needs. You’ll then work together to complete your application package.
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Sba Loan Rates And Requirements
The interest rate for an SBA loan will be negotiated with the lender, but it cannot exceed the SBAs maximum interest rate, which may depend on the term length, the loan amount and the prime rate. The prime rate changes depending on federal interest rates and overall market trends. Some SBA loans also require a down payment. Heres a closer look at SBA loan rates and requirements by type of loan:
Sba Deferral On Existing Home And Business Loans
If you currently have an SBA Serviced Disaster Loan that was in regular servicing on March 1, 2020, then the SBA is providing automatic deferral on your loan through March 31, 2021. Note the following:
- Interest will continue to accrue on your loan during the deferral period.
- 1201 monthly notices will still be mailed but will show no payment due.
- Pre-Authorized Debit payments will not automatically be canceled. You must contact your servicer to do that.
- You may continue making payments if you wish. No contact is necessary.
- After the deferral period, you must resume payments and set up PAD if you canceled it earlier.
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Support For Small Business Owners Directly Through The Sba
There are several other financial assistance options, outside of our normal 7 and 504 loan programs, available for small businesses which you may choose to explore. The American Rescue Plan Act has created two separate grants which are being offered directly through the U.S. Small Business Administration , with additional funding allocated for COVID-19 Economic Injury Disaster Loans.
SBA Disaster Assistance Loans
The U.S. Small Business Administration may be able to provide you low-interest federal disaster loans for working capital.
COVID-19 Economic Injury Disaster Loan
The U.S. Small Business Administration may be able to provide economic relief to small businesses and nonprofit organizations that are currently experiencing a temporary loss of revenue. Unlike the SBA Paycheck Protection Program , the EIDL is administered and funded directly through the U.S. Small Business Administration.
SBA Shuttered Venue Operators Grant Application
The U.S. Small Business Administration may be able to provide economic relief to Hard-Hit Small Businesses, Nonprofits and Venues affected by COVID-19 pandemic. Unlike the SBA Paycheck Protection Program , the SVOG is administered and funded directly through the U.S. Small Business Administration
Important Disclosures And Information
Small Business Administration collateral and documentation requirements are subject to SBA guidelines.
You must be 18 years old or otherwise have the ability to legally contract for automotive financing in your state of residence, and either a U.S. citizen or resident alien .
Bank of America and the Bank of America logo are registered trademarks of Bank of America Corporation.
Commercial Real Estate products are subject to product availability and subject to change. Actual loan terms, loan to value requirements, and documentation requirements are subject to product criteria and credit approval. For Owner-Occupied Commercial Real Estate loans , a loan term of up to 15 years and owner occupancy of 51% or more are required. Small Business Administration financing is subject to approval through the SBA 504 and SBA 7 programs. Subject to credit approval. Some restrictions may apply.
Small Business Administration financing is subject to approval through the SBA 504 and SBA 7 programs. Loan terms, collateral and documentation requirements apply. Actual amortization, rate and extension of credit are subject to necessary credit approval. Bank of America credit standards and documentation requirements apply. Some restrictions may apply.
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How To Build Personal Credit
There are many ways to build personal credit, even if your credit is tanked from previous debts or periods of financial hardship. Building credit is a long process, but one that you must undertake in order to receive government-backed loans. Here are a few ways you can build your credit:
Secured credit card. Some financial institutions offer secured credit cards that allow persons with bad or no credit to start building good credit. The primary differences between a standard credit or debit card is that you must provide a security deposit, which then typically becomes your line of credit amount, and that you must have a qualifying credit score lower than usual for a credit card.
Find a co-signer. Most loans and credit cards allow for an additional party to be held responsible for the debt. In the case of default by the borrower, the co-signer is then held responsible for the balance. This reduces the risk of default for lenders, which makes them more apt to approve a loan to someone with bad credit. A co-signer must have a good credit score themselves, as well as stable income and long-term credit history.
. Most banks and credit card companies allow primary account holders with good credit to add an authorized user to their account. The authorized user becomes responsible for payments, and builds credit in their name. Opening a joint account is another way to share in the benefits of having a primary account holder with good credit.
Is An Sba Loan Right For Your Business
SBA loans can be ideal for working capital, property loans and disaster relief. Think of it as a government-backed loan. You will still be working with a local lender however, the SBA takes on the risk of your loan from the lender, making it more likely for the lender to accept your funding request.
As with any financial decision, assess your businesss situation and talk with a financial advisor to make sure your company is healthy enough to take on debt.
CO aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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Sba Express Bridge Loan
If you already have a business relationship with an SBA Express Lender, then a new Express Bridge Loan Pilot Program offers a quick turnaround on up to $25,000 to help bridge the gap until your SBA Economic Injury Disaster Loan is approved. Bridge funds can be paid in full or in part with proceeds from your EIDL once it is approved.
Changes To Ppp Made By The American Rescue Plan Act Of 2021
When the American Rescue Plan Act was signed into law on March 11, 2021, it provided $7.25 billion for PPP forgivable loans. Additional legislation known as the PPP Extension Act of 2021, signed by President Biden on March 30, 2021, lets business owners apply for a PPP loan through May 31, 2021, extends the covered period for PPP through June 30, 2021, and allows lenders to process PPP loans through that date.
The American Rescue Plan Act further enhances the PPP program by:
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How To Choose The Best Sba Loan
For many businesses, an SBA loan is a way to get a lower interest rate than a regular business loan.
There are 2 reasons for this:
First, the government caps fixed-rate SBA loans at a certain level.
Second, lenders are willing to take more risks when they know the government is there to bail them out.
Having said that, rates can still vary from lender to lender. Therefore, the first thing to look for when comparing SBA lenders is interest rate. In addition, we recommend comparing lenders by reputation, level of customer support, and ease of application process.
Building Better Business Credit
Just like a personal credit score, you’ve got to use credit to build credit. One of the best ways to build business credit is to apply for a small loan like the SBA 7 or SBA Small Loan. A business owner can also open a specific business bank account that is used for all financial transaction related to the business.
If your business has a good relationship with vendors, you can request lines of credit on goods or services. Paying the vendors out slowly will build credit for your business. Similarly, you can apply for a business credit card and make small business purchases with it. If you have poor or no personal credit, financial institutions are likely to allow a very limited line of credit initially.
Over time, you can build your business credit just like your personal credit. It takes time, but to obtain loans that really pack a punch, youll need a solid business credit score.