A guide to loans in the United States

On March 27th 2020, President Trump signed into law the CARES Act, which contains $376 billion in relief for American workers and small businesses.

The Small Business Administration (SBA) is responsible for processing loans to small businesses, as agreed by the President to bridge the economic hardship and ensure that employers can continue to pay their staff and stay in business.

The three main areas of focus as outlined on the Coronavirus Government website include:

  • Providing $350 billion in forgivable loans for any small businesses who apply through the Paycheck Protection Program (covering the costs of keeping employees on the payroll throughout the Coronavirus pandemic)
  • Providing advances on SBA disaster loans, that never have to be repaid
  • Forgiving any existing non-disaster SBA loan repayments for the next six months

Eligibility for the Paycheck Protection Program

One primary way that the SBA and federal government is helping to support small businesses, is through loans under the Paycheck Protection Program. The loans are given to banks, credit unions and other lenders across the United States, who can then in turn provide loans to small businesses. New credit to the program will cease from 30th September 2020.

All businesses with employee numbers totalling 500 or under are eligible for the Paycheck Protection Program, including but not limited to:

  • Non-profits
  • Sole Proprietorships
  • Self-employed individuals
  • Independent contractors
  • Veteran organisations

The loan is approved under the guise that if the employer retains their full staff on payroll, using the loan to cover payroll and any other eligible expenses, then the loan will be forgiven and does not require repayment.

SBA loans

Any existing Small Business Administration loan repayments have been frozen, with no action required for six months following the implementation of the scheme.

This applies for all small businesses participating in any microloan programs, the 7(a) Community Advantage, or the 504. It also applies to any new borrowers under any of these schemes.

The Economic Injury Disaster Loans (EIDL) were approved to help small businesses continue with operation throughout the pandemic. Any eligible businesses could apply and receive an upfront advance payment of up to $10,000 which does not have to be repaid. Any long term loans were subject to very low interest rates.

New applications were ceased on 15th April 2020. To find out more about the EIDL, visit this site.

Towards the end of April 2020, the EIDL was reopened to offer relief to agricultural businesses, as a result of new funding which seeks to support the production of food, the raising of livestock and all other agricultural operations. To find out what is required for an application, head to this site.

Other loans available in the face of Coronavirus

Other loans provided by the United States include:

  • Economic Impact Payments for American workers and their families. Find out more here.
  • The Families First Coronavirus Response Act, which provided early relief of $3.4 billion and covered support for families who rely on free school meals for their children, sick leave pay for small businesses, funding to make COVID-19 tests free for all American citizens, and loans to states to fund unemployment insurance.
  • The Coronavirus Relief Fund which totals $150 billion, and provides payments to the state and local governments to help support expenditures related to the public health emergency. Find out more here.

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