Texas may be gradually emerging from lockdown, but for the state’s small businesses, the picture remains grim. As companies struggle to recoup the losses resulting from several months of forced closure, a question mark hangs over exactly how many will recover, and how many will be lost for good to the crisis. Fortunately, assistance is available. For those that qualify, the Paycheck Protection Program and the Economic Injury Disaster Loan can provide a vital source of funds. Signed into law at the end of March, both programs are designed to provide cash relief to those companies that have suffered substantial financial loss as a result of the pandemic. On June 5th, an amendment to the Paycheck Protection Program was passed, modifying its forgiveness clause to appeal to an even broader spectrum of the business community. If you’re a small business owner, here’s what you need to know about how to apply for a small business loan in Texas.
The Paycheck Protection Program Flexibility Act
In March 2020, the government passed the Paycheck Protection Program, an emergency aid fund designed to support small businesses facing mass closures and lay-offs as a result of the crisis. With a low-interest rate of 1%, loans of up to $10 million, no SBA fees, no early repayment penalties, loan terms of 2 years, and the possibility to apply for loan forgiveness if certain conditions were met, the program proved hugely popular.
But things just got better. On June 5th, the government passed the Paycheck Protection Program Flexibility Act, a modification of the original act that removes several restrictions governing loan forgiveness and improves upon other chief terms. Applicants can now expect an extended maturity of up to 5 years (the extension applies only to loans approved after June 5th, but existing recipients have the possibility to re-negotiate their current loan terms with their provider); the opportunity to extend the loan use period from 8 weeks to 24; loan forgiveness if at least 60% of the loan is used against payroll (previously, this was 75%); and an extension of the payment deferral period to the time that the amount of loan forgiveness is determined.
In order to qualify for loan forgiveness, companies will still need to maintain their current payroll, but they now have until December 31, 2020, to restore any reductions in the number of workers and wage levels (previously the deadline to restore payroll and still qualify for loan forgiveness was set as June 30). In a further change to the previous program, PPP borrowers can now delay payment of their payroll taxes until December 31, 2020, like all other businesses (previously, the program had prohibited those in receipt of the PPP from doing the same). As Fox Business notes, the extension puts small businesses in a prime position to trigger economic recovery. Eligibility may still be limited, but few loans offer quite such appealing terms to those that do qualify.
Does My Business Qualify for the PPP?
To qualify for the PPP, your business will need to meet the eligibility criteria determined by the SBA. Before you start the application process, check if your business ticks the following boxes:
- It’s been in operation since at least 1st Feb 2020
- It’s suffered a negative financial impact as a result of the COVID crisis
- It’s organized for profit and is either primarily based in North America or makes a significant contribution to its economy
- It employs fewer than 500 workers
In addition to the above, independent contractors, gig workers, sole proprietors, private non-profits, tribal concerns, 501 Veteran organizations, and self-employed workers may also qualify for the program if they employ no more than 500 staff.
How Do I Apply for the Paycheck Protection Program in Texas?
If you meet the eligibility requirements for the PPP, you can apply via an approved bank, credit union, or other participating lender. To check which lenders are participating in the program in Texas, search using the SBA’s Lender Finder Tool.
As a word of caution, don’t be tempted to use any lender not listed on the SBA’s website – scam lenders have sprung up all across the country, all of them promising the world, and all of them delivering precisely nothing. Similarly, don’t feel obliged to stick with the first lender you approach – some have a preference for larger companies seeking larger loan amounts, with the result that applications from smaller concerns get pushed to the back of the pile. Enquire into how many applications they’ve processed versus how many they’ve received: if the numbers don’t add up, consider putting your business elsewhere. Once you’ve selected your lender, submit the PPP Borrower Application Form along with your business records for processing.
The Economic Injury Disaster Loan
The Economic Injury Disaster Loan (EIDL) is another program that’s received an influx of federal funds in response to the crisis. Like the PPP, it’s administered centrally by the SBA and is intended to be used exclusively against payroll and operating expenses. Loans are capped at a maximum of $2 million, are available on 30-year terms, and come with a fixed interest rate of 3.75%.While the EIDL doesn’t offer full loan forgiveness in the way of the PPP, applicants can elect to receive up to $10,000 of the total loan as an upfront, fully forgivable grant. 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.
Does My Business Qualify for the Economic Injury Disaster Loan?
As outlined on the EIDL Portal, the program is currently accepting applications from those small businesses engaged in the agricultural field only. Otherwise, eligibility is determined by the same standards as the PPP.
How Do I Apply for the Economic Injury Disaster Loan in Texas?
If you meet the eligibility criteria, you can apply for the EIDL online at the SBA’s EIDL portal. The application process has been simplified for ease of use, and requires little more than a self-declaration of eligibility and confirmation of your business details, ownership, and payroll. If, however, any assistance is required along the way, you’re invited to reach out to any local support center, a full list of which can be found at sba.gov/local-assistance/find/.