As North Carolina moves into Phase 2 of the reopening plan, the state is slowly getting back to work. Of those companies that managed to survive lockdown, the coming weeks will be crucial as they try to make up for the lost revenue of the preceding months. Fortunately, federal assistance can still be requested via one of the loan programs introduced in response to the crisis. If keeping up with payroll and operating costs is stretching your business to breaking point, here’s how to apply for a small business loan in North Carolina.
The Paycheck Protection Program
As Spectrum Local News reports, over 100,000 businesses in North Carolina have received over $12 billion in funds since the government introduced the Paycheck Protection Program in March. The program has since been replenished with a further $320 billion after the Paycheck Protection Program Increase Act came into effect in April – although with huge demand and a ‘first come, first served’ approach, it’s still advisable to file your application as soon as possible to avoid any potential issues.
The program, which is administered by the SBA, provides loans of up to $10 million to small concerns who’ve been in operation since at least January 2020, and who’ve experienced a substantial adverse impact from the crisis. For most businesses, the chief attraction of the loan is the possibility to apply for loan forgiveness, which will be applied on the condition the current payroll is maintained for at least 8 weeks after loan origination, and at least 75% of the loan funds are used against payroll (i.e. wages, compensation, medical leave, and holiday pay) with the remaining 25% to be used against other crucial costs such as rent, utilities, mortgage interest payments, and fixed debts. Loans come with a fixed interest rate of 1%, a maximum loan term of 2 years, and the option to defer payment for the first 6 months. Neither the government nor the SBA will apply administration fees for taking the loan, there is no requirement to provide collateral or a personal guarantee, and no penalties will be applied if you choose to re-pay the loan early. The total amount that can be borrowed is 2.5 times the average monthly payroll costs, up to a maximum of $10 million.
How to Apply for the Paycheck Protection Program in North Carolina
Before applying for the Paycheck Protection Program, you’ll first need to check your eligibility. Only those businesses that meet the eligibility criteria set out by the SBA are eligible to apply. This includes:
- Small businesses that meet SBA’s size standards
- Non-profit organizations, veterans organizations, and tribal concerns that either employ 500 or fewer employees or that meet the SBA industry size standards.
- Any organization with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs fewer than 500 workers per location
- Sole proprietors, independent contractors, and self-employed persons
Once you’ve confirmed your eligibility, download and complete the PPP Borrower Application Form from the SBA website This will then need to be submitted together with your company records to a participating 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 find a full list of approved lenders in North Carolina, check the SBA’s Paycheck Protection Program lender search tool. If you’ve been approached by a lender directly, don’t be tempted to interact with them if they aren’t listed on the SBA website. Numerous businesses have already been targeted by scammers offering guaranteed funding or preferential treatment, so be extremely cautious about handing over information before first checking their status.
Even if a lender is approved, it pays to shop around. Some businesses that have already applied to the program have reported significant delays in their applications being processed: to avoid the same happening to you, ask the lender how many applications they’ve received vs how many they’ve paid out on. If the 1st number is significantly higher than the 2nd, keep looking. As it stands, the SBA is authorized to guarantee loans under the Paycheck Protection Program only until June 30, 2020. Once you’ve chosen your lender, it’s therefore advisable to get your application in without delay to minimize the risk of losing out.
The Economic Injury Disaster Loan
Like the Payment Protection Program, the Economic Injury Disaster Loan (EIDL) is administered by the SBA and is intended to support companies struggling to meet operating and payroll costs. Businesses can apply for both the EIDL and PPP, providing the funds are used for different purposes (e.g., if the PPP is used against payroll costs, the EIDL should be used against operating costs). The maximum amount of loan that can be taken is $2 million, and loan terms are available for up to 30 years, depending on need. Interest is fixed at 3.75%. For businesses looking for an immediate cash injection, there’s also the option to request a $10,000 forgivable advance on the loan, which is paid in the form of a grant within 3 days of loan approval.
How to Apply for the Economic Injury Disaster Loan in North Carolina
Due to the limited availability of funds, the EIDL is currently open to applications only from agricultural concerns employing 500 or fewer employees. Should further funding become available, it’s recommended to check the SBA EIDL portal for details of whether the program will re-open to non-agricultural concerns.
All applications for the EIDL should be made directly to the SBA through their website. In addition to self-verifying your eligibility, you’ll also be asked to confirm details of your payroll, company activities, and ownership. If the company has any criminal history or previous interactions with the federal government, you will need to declare it. Support in completing the application is available from your local SBDC or SCORE mentorship chapter. For general inquiries about the scheme, contact the SBA Customer Service Center on (800) 659-2955 or via email at firstname.lastname@example.org.