Since the COVID crisis began, around 581,405 Tennesseans have filed for unemployment. Considering that small businesses form the backbone of the Tennessee economy, high unemployment rates can only mean one thing – small businesses are in big trouble. As Lt. Gov. Randy McNally said in a statement on 2nd June, “While the COVID-19 crisis started as a public health crisis, the economic crisis it triggered is in some ways even more devastating. The burden the virus has placed on small businesses has been substantial. Jobs have been lost. Savings accounts have been drained. Credit has been stretched.”
While the picture is unquestionably grim, it’s not without hope. As reported by The Tennessean, Gov. Bill Lee recently announced the launch of The Tennessee Business Relief Program, a $200 million fund that will make payments to small businesses to cover some of the damages sustained by executive ordered closures. The program’s timeline has yet to be released, but with the average payout expected to be in the region of $7,200, it can’t come too soon for many. Small businesses in need of additional support in the meantime are well-advised to consider the two loan programs – the Paycheck Protection Program and the Economic Injury Disaster Loan – created earlier this year in direct response to the crisis. With zero fees, low-interest rates, and some very attractive terms, the uptake in both loans since launch has been phenomenal. With the application cut off point set for the end of June, now’s the time to get your application in if you haven’t already. Here, we take a look at how to apply for a small business loan in Tennessee.
What You Need to Know About the Paycheck Protection Program
In an effort to encourage small businesses to avoid mass layoffs and retain their workforce in the face of the crisis, the government passed the Paycheck Protection Program in March 2020. Since then, millions of small businesses have applied for and benefited from the loan program – although with limited funds and a ‘first come, first served’ approach, those who still wish to avail themselves of funding are urged to get their applications in sooner rather than later. As you’d expect of a program that’s intended to incentivize businesses to avoid payroll changes, terms are favorable. Successful applicants can expect a low-interest rate of 1%, automatic payment deferral for the first 6 months, 2-year loan terms, no fees, and no requirement to put up collateral or a personal guarantee. Loans are capped at $10 million, with the maximum amount available to each applicant determined by their average payroll costs.
The popularity of the program isn’t down to the low-interest rate or the payment deferral option, however. For most businesses, it’s the chance to have 100% of the loan fully forgiven. Forgiveness isn’t guaranteed, but providing recipients comply with the requirement to use at least 75% of the loan towards payroll costs (which can include gross wages, health insurance, retirement plans, and Social Security and Medicare) and make no changes to their existing payroll (i.e. if you employed 10 people at the start of the process, you’ll still need to employ 10 people at the end of it. If one of those people leave of their own accord, it won’t be held against you providing you show every effort has been made to replace them), 100% of the loan principal and any accrued interest will be wiped from the slate.
Who Qualifies for the Paycheck Protection Program?
Eligibility for the Paycheck Protection Program is strictly limited to small businesses that have been in operation since at least 1st Feb 2020 and that can demonstrate a substantial loss in revenue as a result of the COVID crisis. All businesses are expected to employ less than 500 or, if greater than 500, comply with the SBA’s Size Standards for industry. Private non-profits, tribal concerns, 501 Veteran organizations, self-employed workers, independent contractors, gig workers, and sole proprietors are also eligible to apply.
How Can I Apply for the Paycheck Protection Program in Tennessee?
If you’re a small business owner in Tennessee eager to take advantage of the Payment Protection Program, check your eligibility first of all. If you meet the requirements, head to the SBA’s PPP portal to download a copy of the PPP Borrower Application Form. Once you’ve completed the form, you’ll need to submit it together with any supporting business documents to a participating bank, credit union, or other approved lender. A full list of lenders in Tennessee can be found on SBA’s Lender Finder Tool. As there have been several reported scams involving unscrupulous lenders, don’t be tempted to use any lender that isn’t explicitly listed as SBA approved, regardless of how good their offer sounds on paper.
What You Need to Know About the Economic Injury Disaster Loan
Like the Payment Protection Program, the Economic Injury Disaster Loan (EIDL) exists to support eligible entities with payroll and operating expenses. Loans are capped at $2 million, and while full loan forgiveness isn’t in the cards, applicants do have the option to request up to $10,000 of the loan as a fully forgivable advance. Interest is fixed at 3.75%, loans come with a 30-year maturity, and like the PPP, there are no loan fees or early repayment penalties. Applicants are welcome to apply for both programs, but only on the condition that the funds from each are not used for the same purpose.
Who Qualifies for the Economic Injury Disaster Loan?
As it stands, the EIDL is open only to small concerns engaged in agriculture. In case further funding allows eligibility to be extended to other sectors, check the EIDL Portal for the latest updates.
How Can I Apply for the Economic Injury Disaster Loan in Tennessee?
Regardless of state, all applications for the EIDL are administered centrally. To apply, visit the SBA’s EIDL portal and complete the online application. Should you require any assistance while completing the application, check out the list of local support centers here.