Vermont may have started reopening in May, but the devasting economic effects of COVID continue to rumble on. Businesses that just about managed to make it through lockdown now face months of uncertainly as their incoming revenue continues to fall short of their outgoing expenses. As Seven Days reports, some businesses are trading at 30% less than their normal figures – an unsustainable level that spells the death knell for any business that doesn’t get support soon. But fortunately, support is available – although with one of its biggest sources ending June 30, time is of the essence for those that want to benefit. If you own a small business that’s been adversely affected by the crisis, here’s how to apply for a small business loan in Vermont.
The Paycheck Protection Program
3 months ago, the government authorized the Small Business Administration (SBA) to back $349 billion in loans to small businesses under a new scheme titled the Paycheck Protection Program. Overtly, the program was intended to stop small businesses resorting to mass layoffs as they struggled to survive lockdown. Keep your staff for at least 8 weeks, and we’ll write off your loan, went the promise. And businesses bought into it. Within just 13 days of being signed into law, the funds were exhausted. In April, a second wave of $320 billion was floated – as of today, $130 billion is still on offer. Although considering how the program just got a lot more attractive, how much longer the funds will last is an open question.
One of the chief attractions of the program has always been its offer of forgiveness if certain conditions are met. But with the first wave of borrowers now at the point of applying for loan forgiveness, the holes in the criteria determining who is and who isn’t eligible for forgiveness have been highlighted, raising concerns that many small businesses who were lured by the idea of a clean slate will now be lumbered with millions of dollars of debt.
In response to the concerns, the government introduced the Paycheck Protection Program Flexibility Act on June 5, an amendment to the original act that still promises the same principle terms (loans of up to $10 million, a fixed interest rate of 1%, no requirement for collateral or personal guarantees, and no SBA fees) but now with the added benefit of a more flexible interpretation of the criteria for loan forgiveness. As Investopedia writes, some of the most notable modifications of the act include:
- An extension of the time borrowers have to spend the funds and still qualify for loan forgiveness from 8 weeks to 24 weeks (but not beyond Dec. 31, 2020).
- A reduction of the mandatory payroll spend from 75% to 60%.
- An increase in the amount borrowers can spend on rent, utilities, and other operating costs from 25% to 40%.
- An extension of the time businesses have to restore payroll and wage levels for an individual’s salary to count toward forgiveness to 31 December.
- An extension of the loan term from 2 years to 5 years for those that don’t take loan forgiveness (businesses who took a loan prior to June 5 will need to contact their lender directly to request an increased term).
- An extension of the payment deferment period from 6 months to the date loan forgiveness is decided.
- PPP borrowers now have the option to delay payment of their payroll taxes until December 31, 2020, in the same way as other businesses.
The modifications will unquestionably help thousands of eligible businesses – but with an application cutoff point of June 30, there’s only a short time left to benefit.
Who’s Eligible for the Paycheck Protection Program?
Eligibility for the PPP remains unchanged, despite the modifications of the Paycheck Protection Program Flexibility Act. Businesses hoping to qualify will need to meet the following requirements to do so:
- Lost revenue as a result of COVID
- Began operating prior to Feb 1, 2020
- Employ less than 500 workers
- Be organized for profit or a private non-profit, tribal concern, 501 Veteran organization, an independent contractor, gig worker, sole proprietor, or self-employed person
How Can I Apply for the Paycheck Protection Program in Vermont?
Regardless of state, the application process for the PPP is the same. First, you’ll need to complete a PPP Borrower Application Form. Once completed, you’ll need to choose a lender – options are extensive but limited only to those that have been given the green light by the SBA to participate. If you’re in any doubt as to whether your local lender is approved, check their details against the full directory available on the SBA’s Lender Finder Tool. Once you’ve decided on your preferred lender, submit the application form plus your business records to them directly for processing.
The Economic Injury Disaster Loan
Just prior to the CARES Act, the government authorized the funding of two loan programs. The first was the PPP. The second was the Economic Injury Disaster Loan. Although capped at a lower value than the PPP (loans are available up to $2 million only), the program features several attractive terms, including a fixed interest rate of 3.75%, no requirement for a personal guarantee or collateral, a 30-year maturity, and no fees. On the flipside, it doesn’t offer the full loan forgiveness of the PPP: it does, however, offer borrowers the option to take up to $10,000 of the loan as a fully forgivable advance.
Who’s Eligible for the Economic Injury Disaster Loan?
Due to overwhelming demand when the program first opened, eligibility for the EIDL has now been strictly limited to agricultural businesses with 500 or fewer employees.
How Can I Apply for the Economic Injury Disaster Loan in Vermont?
Unlike the PPP, the EIDL is handled directly by the government rather than individual lenders. All applications will therefore need to be advanced through the SBA’s EIDL Portal. The SBA promises a streamlined application process that can be completed in 2 hours and ten minutes – if you do find yourself needing help to complete the application, details of local support centers can be found here.