Lockdown may be slowly lifting in some states, but in New Jersey, the shutdown is still in full force. The consequences for both the unemployment rate (which now sits at over 15%) and the state’s economy have been predictably dire. For small businesses in particular, the COVID crisis has hit hard. With operations either completely closed or severely restricted and walk-in trade all but gone, the loss of income suffered by many businesses has been substantial. Fortunately, help is out there. On April 24, 2020, the government passed the Paycheck Protection Program Increase Act of 2020 into law. The act modifies and expands the resources made available through the U.S. Small Business Administration (SBA) under previous legislation. In other words – there’s money in the pot again. If you’re a small business owner struggling to meet expenses, here’s how to apply for a small business loan in New Jersey.
The Paycheck Protection Program
At the end of March 2020, the government introduced the Paycheck Protection Program (PPP). The uptake was phenomenal, and by April, the funds had been exhausted. On April 24, President Trump signed the Paycheck Protection Program Increase Act, replenishing the funds by more than $320 billion. The loans are intended to incentivize small businesses to maintain their payroll – if all employees are retained for 8 weeks after loan origination, and providing at least 75% of the loan is used against payroll (with the remainder to be used against other crucial operating costs), the loan will be forgiven in its entirety.
Loans are available up to a cap of $10 million, with the total limit for each business determined by average monthly payroll costs. To determine the maximum amount you can borrow, multiply your average monthly payroll costs between Feb 15, 2019, and Jun 30, 2019, by 2.5. If the business wasn’t in operation during that period, consider your average monthly payroll costs between Jan 1, 2020, and Feb 29, 2020 instead. Loans have a maturity of 2 years and a fixed interest rate of 1.0%. No collateral or personal guarantees are needed, and payments are automatically deferred for six months. If you choose to re-pay early, no early repayment penalties will apply. Neither will you be charged any administration fees for taking the loan.
Who Can Apply for the Paycheck Protection Program?
The PPP is limited to enterprises that have been in operation since at least January 2020, and that have suffered substantial economic injury as a result of the crisis. As noted by the SBA, eligibility is further limited to:
- Any small business concern that meets SBA’s size standards (either the industry based sized standard 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 employs less than 500 per location
- Sole proprietors, independent contractors, and self-employed persons
How Can I Apply for the Paycheck Protection Program in New Jersey?
The Paycheck Protection Program is administered by the SBA but all loan applications must be made directly via an approved lender. This could be an existing SBA 7(a) lender, a federally insured depository institution, a federally insured credit union, or a Farm Credit System institution. If you have a preferred lender that you’ve used in the past, start by checking whether they’re participating. If you’re struggling to find a lender, SBA provides a full directory of participating lenders via their Paycheck Protection Program lender search tool.
As Investopedia advises, numerous scams and scammers have already sprung up, so don’t be tempted to use any other route to apply for the program: if it seems too good to be true, it probably is. The SBA will never ask for Social Security numbers, bank account information or credit card numbers upfront, so stay vigilant and check the SBA website before proceeding to confirm the lender you wish to use is approved. Once you’ve chosen the lender you want to proceed with, complete the PPP borrower application form from the SBA website and submit together with your payroll records to the lender.
What is the Economic Injury Disaster Loan?
The Economic Injury Disaster Loan (EIDL) is an established program that, like the PPP, is designed to assist small businesses experiencing a temporary loss of revenue. If you’ve already applied for the PPP, you can still apply for an EIDL loan (and vice versa) providing the loan funds are used for different purposes (e.g. if you used the PPP loan funds for payroll, you can’t use an EIDL loan for payroll as well). Loans are capped at $2 million and include an up to $10,000 advance that is automatically forgiven. Loan forgiveness is not available on the remainder of the loan, which comes with up to 30-year terms and a fixed interest rate of 3.75%.
Who Can Apply for the Economic Injury Disaster Loan?
As noted by the SBA, the program is currently open only to agricultural businesses with 500 or fewer employees who are engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural related industries (as defined by section 18(b) of the Small Business Act (15 U.S.C. 647(b)). However, if further funding is received, the program may resume processing applications from other enterprises, so keep checking back on the EIDL portal for further information.
How Can I Apply for the Economic Injury Disaster Loan in New Jersey?
Applications for the EIDL should be made online at the SBA website. Should you require any assistance in completing the application or have any general questions relating to your eligibility, call SBA’s Customer Service Center at (800) 659-2955 or email firstname.lastname@example.org.