SBA’s paycheck protection program a lifeline for Idaho’s small businesses

Small businesses are the economic engine of our country, driving job growth, economic output and private sector employment. Our policymakers understand the importance of supporting small businesses impacted by COVID-19, which is why $349 billon of the federal CARES Act has been allocated to the U.S. Small Business Administration’s Paycheck Protection Program.

Administered through financial institutions, this program will provide loans of up to $10 million to help small businesses, 501c (3) organizations and others retain employees through this economic downturn. This program is subject to SBA approval and restrictions may apply, which is why it’s important to see your banker for details.

These loans can be forgiven if the funds are used to keep employees on the payroll and meet certain other expenses. The program is available retroactively from Feb. 15, 2020, to June 30, 2020, which allows employers to rehire recently laid-off employees through June 30, 2020.

Who should apply?

All businesses — including nonprofits, veterans organizations, tribal business concerns, sole proprietorships, self-employed individuals and independent contractors — can apply if they have 500 or fewer employees.

Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. Additionally, small businesses in the hospitality and food industry with more than one location could be eligible at the store and location level if the store employs less than 500 workers.

Eligible borrowers may apply for loans up to 2.5 times their average monthly payroll costs from the last year, not to exceed $10 million. Seasonal and new businesses will use different applicable time periods for their calculations, and payroll costs will be capped at $100,00 annualized for each employee.

What can the funds be used for?

When approved, the loan may be used to cover payroll cost, rent, utilities or interest on debt obligations that were incurred before the covered period. Portions of the loan could be forgiven if the proceeds were used for these purposes over the 8-week period after the loan is made, while still maintaining employees and compensation levels. No more than 25% of the forgiven amount may be for non-payroll costs.

What will lenders require?

During the loan application process, neither the government nor lenders will charge small businesses any fees. Additionally, no collateral or personal guarantees are required and you will not be disqualified if you sought and were unable to obtain credit elsewhere. Because it’s anticipated this program will be in high demand, it’s important for borrowers to be aware of how lenders will evaluate their applications.

At the direction of the SBA, lenders will consider if the borrower was in operation before Feb. 15, 2020, and had salaried employees, payroll taxes or paid independent contractors.

The primary financial requirement for the SBA Paycheck Protection Program is payroll documentation. To help expedite the application process, begin gathering payroll documentation for 2019 or for newer businesses, the last 90 days. This must include documentation for salary, employee benefits, and state and local taxes assessed on compensation.

Lenders will also ask for a good faith certification that:

·      The uncertainty of current economic conditions makes your loan request necessary to support ongoing operations.

·      You will use the loan proceeds to retain, hire or rehire workers and maintain payroll or make mortgage, lease and utility payments.

·      You do not have an application pending for a loan duplicative of the purpose and amounts you are applying for.

·      You have not received a loan duplicative of the purpose and amounts you are applying for from Feb. 15, 2020 to Dec. 31, 2020.

How do I apply?

Paycheck Protection Program loans will be administered through financial institutions. The application process opened April 3 for small businesses and sole proprietorships and will open on April 10 for independent contractors and self-employed individuals.

Because we anticipate funds will be allocated quickly, it’s imperative that small business owners reach out to their banker as soon as possible for assistance completing the application. As Idaho’s top SBA lender for 18 consecutive years, Zions Bank is well-positioned to guide Idaho small business owners through this process.

If you’d like to learn more about this valuable lifeline, details are available at www.zionsbank.com/CARES.

Jerry Gamb is Western Idaho Retail Lending manager for Zions Bank, a division of Zions Bancorporation, N.A. Member FDIC. He can be reached at (208) 740-9133 or [email protected].