TUCSON, Ariz. (KOLD News 13) - Many individuals and small businesses are struggling to remain afloat during the COVID-19 crisis. The KOLD Fact Finders have received questions about what financial aids are available through the CARES Act.
We turned to locally owned public accounting firm, BeachFleischman for answers. The company created a task force to help their clients navigate through the loans made available through the CARES Act.
Eric Freeman is a CPA and senior tax manager with BeachFleischman, is on that task force and answered our questions regarding the Paycheck Protection Program and Economic Injury Disaster Loans.
“The idea of the Paycheck Protection Program was to help businesses that are struggling right now because of COVID-19 issues, to keep their employees employed during this time,” Freeman said. “It allows businesses to get a loan up to $10 million dollars.”
You need to use at least 75% of the funds on payroll. The remainder can be spent on mortgage interest payments, rent and utilities.
“If you actually use it to pay the designated expenses within 8 weeks after you receive the loan, then you can get it fully forgiven. So essentially, it can be potentially more of a grant than a loan,” Freeman said.
Freeman said the interest loan is low at one percent, you don’t have to make payments for up to six months and you have two years to pay it off.
The CARES Act modified Economic Injury Disaster Loans.
“They increased the limits so you can get up to $2 million dollars in loans and you can also get a $10,000 grant, which was not previously in the program. If you do not receive the loan, you do not have to pay back that $10,000 grant,” Freeman said.
This money is meant to cover expenses you would have been able to cover had it not been for COVID-19. When compared to the Paycheck Protection Program, these loans are more flexible because the funds can be used for a wider variety of expenses. You also have 30 years to pay it back.
So, can you apply for both loans?
“You can get both, you just can’t use the proceeds from both to cover the same expenses. If you get the $10,000 grant from the Economic Injury Disaster Loan, then that will reduce the amount of the loan that is forgiven under the Paycheck Protection Program,” Freeman said.
So, who qualifies for these loans?
According to the Small Business Association, the following entities affected by COVID-19 may be eligible for the Paycheck Protection Program:
- Any small business concern that meets SBA’s size standards (either industry based sized standards or the alternative size standard)
- Any business, 501 (c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31 (b)(2)(C) of the Small Business Act) with the greater of: 500 employees, or that meets the SBA industry size standard if more than 500
-Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employees less than 500 per location
-Sole Proprietors, independent contractors, and self-employed persons
If you wish to begin preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender.
The SBA’s Economic Injury Disaster Loan is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19.
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.
To apply for a COVID-19 Economic Injury Disaster Loan and loan advance, click here.