As the lockdown continues, more and more businesses are struggling to keep afloat, with small businesses in particular feeling the pinch on a major scale. If you’re a small business owner in Kansas experiencing difficulties in meeting payroll and operating costs, help may be available on both a federal and state level. Further to the introduction of the CARES Act of March 27, small businesses have the option to apply for two new loans intended specifically to support businesses who’ve suffered a temporary loss of revenue as a result of the crisis. Although acceptance is based on the continued availability of funds, both loans have the advantage of a streamlined application process and preferential terms. Here’s what you need to know about applying for a small business loan in Kanas.
The Paycheck Protection Program
The Paycheck Protection Program (PPP) has been implemented to encourage small businesses to retain their workforce by providing a low interest, zero-fee loan that can be fully forgiven if certain criteria is met. In brief, the PPP offers:
- A 2-year loan term
- No administration fees or prepayment penalties
- No requirement for collateral or a personal guarantee
- A fixed interest rate of 1%
- Automatic 6 month payment deferral
- Loan forgiveness if at least 75% of the funds are used towards payroll with the remainder to be used on rent, mortgage interest payments, utilities, and other operating costs
If you’re a small business owner in Kansas whose business has been in operation since at least January 31, 2020, you’ll be eligible to apply for the PPP if:
- You employ less than 500 workers
- You employ more than 500 workers but as classed as a small business under the SBA Size Standards
- You are a registered 501 Veteran organization, a cooperative, a private non -profit, a tribal business, a sole proprietor, an independent contractor, or a self-employed person.
How Much is Available?
Loans are capped at $10 million, with the maximum amount any business can claim equating to two months of average monthly payroll costs from the previous year plus an additional 25% of that amount on top. Payroll costs are capped at $100,000 per employee.
How Can I Apply?
All applications for the PPP should be made via an existing SBA lender or any federally insured depository institution, federally insured credit union, or Farm Credit System institution who is approved to offer PPP loans. A full list of participating lenders in Kansas can be found on sba.gov. To begin the application process, download a copy of the PPP borrower application form from the SBA website. You will need to submit the completed form along with any supporting documentation required to your chosen lender by June 30, 2020.
The Economic Injury Disaster Loan (EIDL)
Administered by the SBA, the Economic Injury Disaster Loan (EIDL) provides financial relief to small businesses who’ve suffered a loss of revenue as a direct consequence of the COVID-19 crisis. Like the PPP, it aims to support with payroll expenses such as wages, compensation, holiday pay, healthcare benefits and retirement benefits, along with operating costs such as mortgage payments, rent, and utilities. Chief terms to note including:
- A maturity of up to 30 years, depending on business needs
- A credit check and a review of the business tax records will be performed as part of the application process
- No SBA fees
- No requirement to show an inability to obtain credit elsewhere
- No requirement for collateral on loans of up to $25,000
- Automatic one-year deferment on repayment
- A fixed interest rate of 3.75% for businesses and 2.75% for nonprofits
- No personal guarantee required on loans of up to $25,000
- A forgivable advance of $1000 per covered employee, up to a maximum of $10,000
Like the PPP, the EIDL is limited to businesses who have been negatively impacted by COVID-19 and fall within the following categories:
- A small business (including sole proprietorships, independent contractors and self-employed persons) with 500 or fewer employees
- A business with greater than 500 employees in heavily-impacted industries that meet the SBA’s size standards for those industries
- Small agricultural cooperatives
- Small aquaculture businesses
- Private non-profit organization or 501(c)(19) veterans organizations
The following businesses are not eligible, regardless of the number of employees:
- Religious Organizations
- Charitable Organizations
- Gambling Concerns
- Casinos & Racetracks
- How Much is Available?
- Loans are available up to a maximum of $2 million.
How Can I Apply?
Unlike the PPP, applications for the EIDL should be made directly to the SBA via their official website. The process has been streamlined for ease of use, and according to the SBA itself, should take no more than 2 hours 10 minutes to complete. Before you begin your application, be sure to have all the required documents regarding payroll, operating costs, and business information to hand.
Step 1: Verify Your Eligibility
You’ll first be asked to self-verify that your business meets the eligibility criteria for the EIDL. You’ll also be asked to sign a disclosure to verify that all information presented in the application will be truthful and accurate to the best of your knowledge.
Step 2: Enter Your Business Information
As part of the next step, you’ll be asked to verify information relating to the business, its activities, and its revenue. All questions marked with a red star need to be completed; those without do not need to be completed if not applicable.
Step 3: Confirm Ownership
If your business is partially or wholly owned by another individual or entity, you’ll be asked to confirm their:
- Full name and contact details
- Birthdate and birthplace
- Citizenship status
Step 4: State Criminal History
If you’re aware of any criminal history relating to the business or any prior federal interaction, step 4 is where you’ll need to state it.
Step 5: Submit
Just prior to submitting, you’ll be asked if you would like to receive $10,000 of the loan amount as a forgivable advance. If you chose this option, the advance will be paid to the bank details you provide within 3 days of your loan being accepted. If any assistance is needed in completing the application, contact 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).