New York may be moving into a phased re-opening, but it’s going to be a while before the economy starts to show signs of recovery. Until that happens, small businesses who’s been financially impacted by the COVID-19 crisis can continue to make use of the financial assistance that’s been introduced under several measures, including the CARES Act. If you’re a small business owner who’s struggling to meet payroll or operating costs as a result of the virus, here’s how to apply for a small business loan in New York.
The New York Forward Loan Fund
As Forbes notes, small businesses in New York may soon be eligible for support under a new initiative to be launched by Governor Andrew Cuomo. The small business relief program will work in coordination with private banks to offer $100 million in funding to adversely affected businesses across the state. Eligibility will be strictly limited to businesses with 20 or fewer employees and less than $3 million in gross revenues. The program was announced during the Governor’s May 22 press briefing, with more details expected to follow shortly about when the program will open and how businesses can apply.
The Paycheck Protection Program
In March 2020, the government introduced a series of measures designed to support businesses and individuals affected by the crisis. Of those, one of the most notable for small businesses is the Paycheck Protection Program, a scheme intended to incentivize companies to retain their current staffing levels by offering low interest, forgivable loans up to a maximum of $10 million. Due to the huge demand, the program was temporally put on hold in April. It’s since resumed further to an additional $320 billion being plowed into the program via the Paycheck Protection Program Increase Act.
Paycheck Protection Program Terms
The PPP, which is administered by the Small Business Administration (SBA), has been designed to support small businesses with preferential loan terms and full loan forgiveness under certain conditions. Chief terms to note include:
- Fixed interest rate of 1%
- A maximum loan amount of 2.5 times the average monthly payroll costs, up to a maximum of $10 million
- Maximum loan term of 2 years
- Payments are automatically deferred for the first 6 months. Further deferral is conditional on the lender
- No government or SBA administration fees
- No penalties for early re-payment
- No requirement for collateral or personal guarantees
Who Can Apply for the Paycheck Protection Program?
As the SBA outlines, the Paycheck Protection Program is open to A 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
In addition to the above, businesses must have been in operation since at least January 2020 and have suffered a substantial economic impact as a result of the COVID-19 crisis in order to qualify.
How to Apply for the Paycheck Protection Program in New York
Note that while the program is administered by the SBA, it does not accept direct applications. If you’re eligible to apply for the Paycheck Protection Program, you will need to make your application through 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. To check which lenders in New York are approved to participate in the program, check the SBA’s Paycheck Protection Program lender search tool.
Don’t be tempted to go with any lender that’s not listed as approved on the SBA website, no matter how great their offer seems. Scammers have already started going after small businesses, and the SBA is warning potential applicants to be particularly vigilant in ensuring they don’t provide any information to a lender before first checking they’re approved. If a lender asks for Social Security numbers, bank account information or credit card numbers upfront, avoid. Once you’ve chosen a lender, download the PPP borrower application form from the SBA website. Once completed, you’ll need to submit it together with your payroll records directly to your preferred lender.
The Economic Injury Disaster Loan
In addition to the Payment Protection Program, the government has also allocated additional funds to the established Economic Injury Disaster Loan (EIDL). Like the PPP, the EIDL is intended to provide financial relief to small businesses affected by the crisis. Since funds are limited, the program is currently limited only to agricultural concerns: other businesses are advised to continue monitoring the EIDL portal to check if, and when, availability re-opens to businesses in other sectors.
Economic Injury Disaster Loan Terms
The EIDL is available up to a maximum loan amount of $2 million, and is subject to the following terms:
- Loan terms of up to 30 years, depending on the needs of the business
- A fixed interest rate of 3.75%
- The option to receive up to $10,000 of the loan as a forgivable advance
Who Can Apply for the Economic Injury Disaster Loan?
Due to limited funds, the SBA is currently accepting applications only from 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)). Note that if you fulfill the eligibility requirements for both the EIDL and the PPP, you’re invited to apply for both on the condition you don’t use the loans for the same purpose. So, for example, if you use funds from the PPP for payroll, you will be expected to use the EIDL towards operating costs.
How Can I Apply for the Economic Injury Disaster Loan in New York?
If your business is based in New York and fulfills the eligibility requirements of the EIDL, you can make your application directly through the SBA website. Expect to be asked to verify your eligibility and provide information relating to payroll, business activities, and ownership. Be aware that if the business has any prior criminal history or has had any involvement with a federal agency in the past, you will be expected to declare it. If you need any assistance in completing the application or have any general queries about the program, contact the SBA Customer Service Center on (800) 659-2955 or via email at firstname.lastname@example.org.