Federal Payroll Protection Loan Applications Start April 3rd: COVID-19 Transportation Update - Wednesday, April 1, 2020
The SBA Issues Guidance for the Paycheck Protection Program Loan Program: Loan Process Starts on Friday!
On March 31, 2020, the United States Small Business Administration provided guidance to lenders and borrowers with an update on the Paycheck Protection Program (“PPP”) loan program. There were many significant updates provided in the SBA guidance. The SBA announced that, starting April 3, 2020, small businesses and sole proprietorships can apply for and receive PPP loans. Starting April 10, 2020, independent contractors and self-employed individuals may begin applying for the PPP loans. So, small businesses and sole proprietors have a one-week advantage to apply for PPP loans. The PPP loans are being handled by an existing SBA lender, or through any federally-insured depository institution, federally-insured credit union, or Farm Credit institution. Other regulated lenders will be available to make the PPP loans as soon as they are approved and enrolled in the PPP loan program.
The SBA also announced that the loan terms will be the same for everyone. The interest rate has been set at 0.5% for the PPP loans. Originally, The CARES Act indicated the interest rate could be as high as 4%. So, this is much less than anticipated. Additionally, the loan term is set at 2 years. The CARES Act stated the PPP loans could have a term of up to 10 years. As a reminder, no personal guarantee or collateral will be required for the loans. Prepayment penalties will be waived as well. Loan payments will be deferred for 6 months; however, interest will continue to accrue over this period. When the SBA issued its guidance for the PPP loan program it also issued a PPP loan application.
Since the loan amount is based on payroll costs (plus the amount of an SBA Economic Disaster Assistance Loan that was made after January 31, 2020), transportation companies will need to provide documentation of their payroll costs with the loan application. The PPP loan program offers loan forgiveness up to 100% of the loan amount. Payroll costs, mortgage interest, rent, and utilities payments made in the 8 weeks after getting the loan may be forgiven. You will owe money if you do not maintain your staff and payroll. Due to likely high subscription, the SBA anticipates that not more than 25% of the forgiven amount may be for non-payroll costs. The deadline for submitting PPP loan applications is June 30, 2020. There is a finite amount of funds for the PPP loans, so transportation companies need to prepare today to be ready for the opening bell on Friday!
If you have any questions about the federal programs or other assistance programs, please reach out to MATT DAUS at mdaus@windelsmarx.com or (212) 237-1106. To assist the industry at its time of need, our team is providing free advice to industry members!
Matt Daus Addresses NLA Members About Loans and Grants Available for Transportation Companies & Drivers
Matt Daus participated in a National Limousine Association webinar providing updates and interpretation on the COVID-19 legislation and its effects on the ground transportation industry. Matt discussed the merits of the Economic Injury Disaster Loans (“EIDL”) and the Paycheck Protection Program (“PPP”) for transportation companies. Providing the most “bang for your buck,” Matt advised that companies that are facing the economic downturn due to the COVID-19 pandemic should consider the PPP loans – which will be handled by banks and credit unions directly. Since the PPP loans are applicable to companies that have 500 employees or less, many transportation companies will qualify. The EIDL also comes with an immediate Emergency Grant of $10,000 that is available to all eligible applicants within 3 days of applying. If the business needs an immediate cash injection for one of those purposes, then the EIDL application is an option for that.
Since the SBA guidance and the PPP loans are going to begin on April 3, 2020, transportation companies should assemble payroll records, bank statements and tax returns to be ready to apply Friday! Watch the full discussion here.
