SBA Coronavirus Relief Loan
UPDATED: April 3, 2020
Non-SBA related request.
At VLocity Group we are working with a client that has developed some pricing technology that uses multiple sources for data and it not working with brokers. They would like to get your feedback on how you use technology and your needs as a small carrier. If you would not mind taking 3-minutes to answer a couple question it would help us out.
April 3, 2020
Watch out for Scams
These are coming in different forms. The two most common are:
1. Financial companies asking for data about your business to process a loan that is not being submitted in the SBA application. These companies are looking to get you in their application process to get you to take high interest, predatory loans. While the practice is legal, unfortunately, it is just a byproduct of what happens when programs like this become available.
2. People charging money to apply for the loan for you. First, if you do not know them then you need to avoid them. If you business relationship is not more than you have done a few transactions, then you may not want to work with them.
If it is your tax person or accountant that is offering to help out then they are likely not looking to take advantage of you. Remember, this should only take 15-30 minuets to process.
The good news is that on Thursday night, the SBA issued a lengthy guidance on the process to the banks.
The challenge is that this did not leave a lot of time between then and now for the bank to really set-up lending policies and make sure they are protected (it is there money they are lending based on SBA guarantees so they want to make sure that they are not making mistake. Which is very fair.).
From all indications, banks are going to be working with existing customers first. If the bank that you have is already approved as an SBA lender, then follow their website for information on how they are processing loans.
If your bank is not an SBA lender, check with them on what they recommend. It is likely they are in the process of getting set-up so that they can process the PPP loans.
April 1, 2020 – Here is a sample Paycheck Protection Program application that was released by the SBA. This seems almost too simple so please do not assume when the banks are involved that this will be the extent of the process.
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March 31, 2020 – We did not expect to get a lot of news on the Paycheck Protection Program (PPP) since Monday was the first full business day that the SBA has had to work on setting up the process and putting protections in place.
Secretary Munchin did say that they would be ready to start accepting loans by Friday of this week. I am sure that they will be able to hit that window in terms of accepting applications. The first rounds of funds going to companies in need may be a little tougher to facilitate. However, Munchin has reiterated that they will have a simple application process so that businesses can get needed funds the same day that an application is approved.
At VLocity Group we do not want to add to the spread of bad information. Our goal is the help carriers get the information and point out the bad information and keep people alerted of scams.
On that note, it seems that they only way for SBA “Experts” to get mentioned in the news is to spread negative information based on what happens with current SBA loans. Since SBA has not been able to release full details, anything that is said around the details of processing these loans is pure speculation.
But no one gets quoted in the news saying “We have not current information and waiting for the SBA to provide details and guidance.”
- It will take banks 60-90 days to process these loans. This is the one that is spreading around that is based on what happens in the traditional SBA loan process. While we have no specific information other that what Munchin is saying, these are far from traditional times so we should not assume traditional process will apply.
- Banks can’t be forced to process loans and they have a $200,000 minimum loan amount. While this statement has been true in the past we are again in different times. And banks that have been SBA lenders in the past will find that they have some competition with the SBA opening this up to all FDIC Banks, Credit Unions, and FinTech.
- I talked to by banker and they told me that banks are not processing these loans. There is confusion about the initial rounds of emergency loans, that the SBA process directly, and the current PPP. The SBA was very specific when this bill was being drafted that they would not be able to process applications for a program this size. They even said that their current approved lenders would not be able to process this amount of volume. While the details of how it is going to work will be released this week, one thing that we do know is that these will be processed through financial institutions.
We are going to be putting up a scam alert page to help protect carriers from financial predators. If you come across a scam please send us an email with as much detail as possible to Info@VLocityGroup.com.
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March 29, 2020 – On “Fox New Sunday”, Treasury Secretary Steve Munchin that the administration is focused on getting the money out quickly. “That’s a combination of small business loans that will be available this week” and checks to household which he called “bridge checks”.
“And FDIC bank, any credit union, any fintech lender will be authorized to make these loans” to small business subject to certain approvals, Mnuchin said.
No details had been given on what those approvals will be.
When VLocity Group talked earlier to people familiar with SBA lending, they did not see how loan amounts under $200,000 would get fulfilled considering most SBA lenders have that amount as their minimum loan amount. They also cautioned on timing since the average SBA loan can take 60-90 days to fund.
This conversation took place before reviewing comments by Munchin.
We will continue to follow and report on how truckers that are impacted by COVID-19 can access these funds.
Get more information on the Paycheck Protection Program.
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At VLocity Group we are going to be working on providing information on the SBA 7(a) Paycheck Protection Program Loan.
Please pay attention to the date this page was updated. The bill was signed by President Trump on March 27th and early information is from lenders in this space that have been looking at the text in the bill or have worked with Congress on helping draft the relief program.
Please do not take this information as being 100% accurate. It is based on the best information that I can find and it will be updated regularly.
We will also be posting a list of non-bank lenders that are approved by the SBA.
President Trump recently announced an unprecedented $50 billion (now raised to $367B) that will be added to the SBA lending authority in the wake of the COVID-19 pandemic. Fountainhead is one of only 14 nonbank lenders licensed to make SBA 7(a) loans, so they will be actively making COVID-19 SBA 7(a) recovery loans.
List of Non-Bank SBA Lenders
Information Coming Soon
FAQ – Paycheck Protection Program
Here is a shortlist of the items we believe we’ll need to process the SBA 7(a) relief loan:
- Completed Application
- SBA Form 1919 or corresponding SBA Form 912, if applicable.
- Articles of Incorporation/Organization of each borrowing entity
- By Laws/Operating Agreement of each borrowing entity
- All owners Driver’s Licenses
- Payroll Expense verification documents to include:
- IRS Form 940 and 941
- Payroll Summary Report with corresponding bank statement
- If a Payroll Summary Report is not available, Employee Pay Stubs as of February 15, 2020 (or corresponding period) with corresponding bank statement, and,
- Breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.
- 1099s (if Independent Contractor)
- Certification that all employees live within the United States. If any do not, provide a detailed list with corresponding salaries of all employees outside the United States
- Trailing twelve-month profit and loss statement (as of the date of application) for all applicants
- Most recent Mortgage Statement or Rent Statement (Lease)
- Most recent Utility Bills (Electric, Gas, Telephone, Internet, Water
- The borrower is eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date of the loan on eligible payroll costs, interest payments on any mortgage incurred prior to February 15, 2020 (excludes principal and prepayments), payment of rent on any lease in force prior to February 15, 2020, and payment on any utility for which service began before February 15, 2020. Amounts forgiven may not exceed the principal amount of the loan.
- Forgiveness on a covered loan is equal to the sum of the following: eligible payroll costs (excludes compensation above $100,000 in wages) incurred during the covered 8 week period compared to the previous year or time period, proportionate to maintaining employees and wages: eligible payroll costs plus any payment of interest on any covered mortgage obligation (excludes any prepayment of or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation + and any covered utility payment. Borrowers will verify these payments through documentation required by lenders, such as (but not limited to) IRS Payroll Expense Forms 940 and 941, mortgage statements, lease statements and utility statements.
- The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior-year compensation. To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
- Canceled indebtedness resulting from this section will not be included in the borrower’s taxable income.
- Any loan amounts not forgiven at the end of one year are carried forward as an ongoing loan with terms of a max of 10 years at 4% interest. The 100% loan guarantee remains intact.
- Cannot apply for any other programs through the SBA for the same purpose.
- If a borrower has an EIDL Loan unrelated to COVID-19, the borrower is still eligible.
- The emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven under the Paycheck Protection Program.
- Eligible borrowers will be required to make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; they will use the funds to retain workers and maintain payroll, lease, and utility payments; and are not receiving duplicative funds for the same uses from another SBA program.
The loan will be unsecured.
10-year full payout loan. There will be no prepayment penalty. Allows for complete deferment of SBA 7(a) Loan payments for at least six (6) months and not more than a year.
Allowable uses of the loan include eligible payroll support (eligible employee salaries which excludes compensation above $100,000 in wages, paid sick or medical leave, insurance premiums), interest paid on a mortgage (excludes any prepayment of or payment of principal) or rent, and utility payments.
Average eligible monthly payroll costs, excluding compensation above $100,000 in wages (based on prior 12 months) multiplied by 2.5 (represents months) – plus – the balance of any SBA Loan closed between 1/31/2020 and when this loan will be made, if applicable – OR – $10 million whichever is less.
Business must be operational as of February 15, 2020 and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor.
- Small businesses, 501(c)(3) nonprofit, a 501(c)(19) veteran’s organization, or Tribal business concern described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees, or the applicable size standard for the industry as provided by SBA, if higher.
- Sole-proprietors, independent contractors, and other self-employed individuals as eligible for loans.
- Businesses with more than one physical location qualify so long as total combined employees are below 500 employees (unless the businesses operated under NAICS code beginning with 72) or otherwise meet the SBA’s size standard based on NAICS code.
- Waives affiliation rules for businesses in the hospitality and restaurant industries, franchises that are approved on the SBA’s Franchise Directory, and small businesses that receive financing through the Small Business Investment Company (SBIC) program.
- Applies current SBA affiliation rules to eligible nonprofits.