If you’re a small business owner in Arkansas, it’s likely you’re already feeling the effects of the COVID- 19 crisis. Layoffs, forced closures, a downturn in the market… however you look at it, the situation’s grim. It’s not, however, hopeless. On March 27, the government introduced the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion stimulus package aimed at providing an immediate cash injection to those worst hit. If you’re not already aware in its provisions, it’s well worth investigating if, and how, it could help. While most of the news around the act has centered on its expansion of the unemployment benefits package, it also offers several measures aimed specifically at small businesses… good news not just for the businesses themselves, but for the workers they employ.
“I am instructing the Small Business Administration to exercise available authority to provide capital and liquidity to firms affected by the coronavirus,” President Trump announced at the rollout of the bill. “Effective immediately, the SBA will begin providing loans in affected states and territories. These low-interest loans will help small businesses overcome temporary economic disruptions caused by the virus.” Nice words, but what does this mean in practice? And what can small business owners in Arkansas do to help themselves to a slice of the pie?
Small Business Loans in Arkansas
Key among the CARES Act’s provisions are two small business loans – the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) – which will both be administered by the Small Business Administration (SBA). As the application process, loan terms, and loaning entity differs according to loan type, it’s worth checking the fine print to see which is most applicable to your situation.
How to Apply For The Economic Injury Disaster Loan (EIDL) in Arkansas
As Conway notes, the Economic Injury Disaster Loan (EIDL) is designed to offer relief to any small businesses and nonprofits that have sustained a significant economic injury as a result of COVID- 19. Designed to cover payroll and other operating expenses up to a maximum loan size of $2 million, the EIDL offers immediate relief to qualifying entities, along with the option to defer principal and interest payments for a maximum of 4 years.
To qualify for a loan, an application will need to be filed directly with the SBA. The first step of the application process involves a two-part eligibility check in which you will need to confirm your business falls within the qualifying guidelines in terms of size and type and is not involved in any disqualifying activities. Once you’ve completed the eligibility check, you’ll need to provide:
- Legal/ trade name of the business
- SSN or EIN number
- Total revenue for the 12 months preceding January 31, 2020
- Total number of employees on the payroll
The next section will ask you to verify whether the business is owned by another entity (if it is, you’ll be expected to provide information about the entity and get them to sign a loan guarantee), along with information relating to the owner. Finally, you’ll need to confirm any relevant criminal history or interactions with the federal government, verify the details of anyone who has assisted you with the loan application, and provide your bank account information.
If you wish, you can also request a $10,000 advance on the loan, which will be paid within three days of approval and does not need to be paid back. Payment for the remainder of the loan falls one year after the loan origination date and is available on terms of up to 10 years with an interest rate of 3.75% for businesses, 2.75% for non-profits.
How to Apply For The Paycheck Protection Program (PPP) in Arkansas
With a loan term of 2 years, an interest rate of 0.5%, and a maximum loan size of $10 million, the Paycheck Protection Program is an attractive proposition to small businesses in Arkansas struggling to meet payroll costs. As per the SBA guidelines, you must confirm the loan is intended to cover one or more of the following expenses:
- Compensation (salary, wage, commission, or similar compensation)
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Group health care benefits, including insurance premiums
- Retirement benefits
- Payments of interest on any mortgage obligation
The maximum amount that can be borrowed is $10 million; however, the actual amount your business may be eligible for depends on the length of time in operation and the number of employees on the payroll. If your business was in operation between February 15, 2019, and June 30, 2019, you will be eligible for a loan equal to 250 percent of your average monthly payroll costs. If the business began operating after June 30, 2019, you will be eligible to a loan equal to 250 percent of your average monthly payroll costs from January 1, 2020, through February 29, 2020.
Entities eligible to apply for the loan include:
- Businesses that have suffered financial hardship as a result of COVID-19 between February 15, 2020, and June 30, 2020.
- sole proprietors, independent contractors, self-employed persons, private non-profit organizations or 501 veterans organization.
- Businesses that have fewer than 500 workers on the payroll, or that qualify under the definition of small business by their sector.
While the EIDL is provided directly by the SBA, PPP’s are issued by any participating federally insured depository institution, federally insured credit union, Farm Credit System institution, and bank that is already an SBA lender. In Arkansas, the participating loan providers include:
- First State Bank of DeQueen
- Peoples Bank
- First National Bank of North Arkansas
- Simmons Bank
- The First National Bank of Lawrence County at Walnut Ridge
- First National Bank of Eastern Arkansas
- Bank of Little Rock
- Farmers Bank
- First National Bank of Fort Smith
- Priority Bank
- Arkansas Capital
- United Bank
- Signature Bank of Arkansas
- Focus Bank
- Arkansas Federal Credit Union
- United Bank
- Relyance Bank
- Signature Bank
Applications should be made directly to your preferred lender. To facilitate and expedite the process, the SBA provides an application form that can be completed in advance and presented directly to the lender.