Pennsylvania may be slowly starting to emerge from lockdown, but the effects of Governor Tom Wolf’s decision to combat the spread of COVID by restricting all nonessential economic activity are still being felt. Unemployment figures continue to rise, and the state’s many small businesses are still struggling to meet everyday expenses. Unemployment benefits can provide vital support to unemployed individuals, but what help, if any, is available for businesses? Fortunately, help does exist in the form of two recently introduced, SBA-backed loans… although with an application cut-off point of the end of June, you’ll need to act quickly if you want to benefit. Here, we look at how you can apply for a small business loan in Pennsylvania.
What is the Paycheck Protection Program?
If you own a small business that’s been adversely affected by the crisis, the Paycheck Protection Program (PPP) could prove a lifeline. Open to applications since March 2020, the program provides low-interest loans to businesses that can demonstrate significant financial loss as a result of the pandemic and fulfill certain eligibility requirements. The loans come with a number of interesting perks, including a low-interest rate of 1%, no fees, repayments terms of up to 2 years (with no penalties for early repayment), and no requirement to provide collateral or a personal guarantee. Unlike most SBA-backed loans, there’s no requirement to demonstrate an inability to get credit elsewhere. For most businesses, however, the most appealing aspect of the loan is the opportunity to apply for loan forgiveness. The forgiveness is conditional on the following:
- At least 75% of the funds should be used against payroll costs such as salaries, compensation, severance pay, holiday pay, and paid benefits such as medical and childcare cover
- Any funds not used against payroll should be used against operating costs such as rent, mortgage interest re-payments, utilities, and fixed debts
- The current payroll will need to be maintained for at least 8 weeks after loan approval. If any employees leave the business, you will need to demonstrate that every effort has been made to replace them
If the above conditions are met, both the principle of the loan and any accrued interest will be forgiven. Loans are available up to a maximum of $10 million, depending on your average monthly payroll costs. To calculate you much you can apply for, multiply your average monthly payroll expenses between Feb 15, 2019, and Jun 30, 2019, by 2.5. If the business wasn’t in operation during that period, use the payroll costs from Jan 1, 2020, and Feb 29, 2020, instead.
What Are the Eligibility Requirements of the Paycheck Protection Program?
To be considered for the PPP, you’ll need to have been in operation since at least Jan 2020 and suffered a loss in revenue as a result of the crisis. The business will also need to:
- Either employ fewer than 500 workers or meet the industry size standards outlined by the SBA
- Be a tribal concern, a private non-profit, a 501 Veteran organization, or an independently owned franchise which employs less than 500 or meets industry size standards if more than 500
- The program also accepts applications from self-employed workers, independent contractors, gig workers, and sole proprietors.
How Can I Apply for the Paycheck Protection Program in Pennsylvania?
To apply for the Paycheck Protection Program in Pennsylvania, you’ll need to apply directly via an approved lender. If you’ve already worked with a lender you trust in the past, you can contact them to see if they’re participating. Otherwise, check which Pennsylvania lenders are approved by using the SBA’s Lender Finder Tool.
As the PPP program has been the target of several scams, be sure not to provide any information to a lender that isn’t authorized to participate in the program. Additionally, don’t feel shy about asking lenders as many questions as needed to establish if they’re the best fit for your needs. Some businesses have reported a tendency among certain lenders to prioritize larger loan requests over smaller amounts – as funding is limited and treated on a first-come, first-served basis, this approach puts smaller concerns at risk of losing out. Ask your potential lender how many loan applications they’ve received versus how many they’ve paid out on – if the answer sets off warning bells, try someone else. Once you’ve confirmed your choice, download the PPP borrower application form to see what kind of information will be requested by your lender.
What is the Economic Injury Disaster Loan?
Similarly to the PPP, the Economic Injury Disaster Loan (EIDL) provides financial relief to businesses that have suffered a loss in revenue as a result of the COVID-19 crisis. Loans are available up to a maximum of $2 million and benefit from a low-interest rate of 3.75%, a 30-year maturity, and no fees. While full loan forgiveness isn’t offered, businesses in need of immediate assistance can benefit from an advance payment of $10,000, which is paid as a non-repayable grant within 3 days of loan approval.
What are the Eligibility Requirements of the Economic Injury Disaster Loan?
Due to limited funds, the EIDL is currently open only to small, agricultural concerns employing 500 or fewer workers. If you are eligible for both the EIDL and the PPP, you are welcome to apply for both on the condition you utilize the funds for different purposes (e.g., if you use the PPP for payroll, the EIDL should be used for operating costs).
How Can I Apply for the Economic Injury Disaster Loan in Pennsylvania?
To apply for the EIDL in Pennsylvania, complete your application at the SBA’s EIDL portal. Should you require any assistance in completing the application, or if you would like to discuss whether the EIDL is the right fit for your needs, support is available at any local resource center. You can request information by calling the SBA’s Customer Service Center at 1-800-659-2955 (1-800-877-8339 for the deaf and hard-of-hearing), or by emailing email@example.com.