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New Stimulus Bill Provides Financing Opportunities For Small Businesses January 06, 2021 (0 comments)


Washington, DC—In addition to much-needed relief to consumers, the $900 billion coronavirus stimulus bill passed in late December also offers small businesses some attractive financial assistance even if they weren’t directly impacted by the pandemic.

In this article in the Philadelphia Inquirerauthor Gene Marks explains the new stimulus bill forgives up to eight months of principal and interest payments on Section 7(a) and 504 Microloans from the Small Business Administration. 

A Section 7(a) loan, received through an SBA lender, can be used for working capital, equipment, inventory, and business acquisitions, explains Marks. Businesses with fewer than 500 employees and less than $7.5 million in average annual receipts can borrow up to $5 million at both fixed and variable interest rates, with maturities from seven to 25 years.

The 504 Microloan program is available to purchase commercial real estate, existing buildings, and equipment to grow a business, says the article. The loans also have a $5 million limit and similar requirements to the Section 7(a) loans, but with fixed interest rates and 10-20 year maturities.

Small businesses that already have one of these types of loans can get from three to eight months’ forgiveness of principal and interest, capped at $9,000 per month.

Read the full article here.

Separately, the December legislation also includes a new round of Payroll Protection Program (PPP) loans. Both new borrowers and small businesses that received PPP loans in the spring during the first round of pandemic relief may participate, though the eligibility requirements have rightfully been tightened after at least 94 large, publicly-traded companies received money in the first round.

For the second round of loans, businesses may not be publicly traded companies, must have fewer than 300 employees, and have experienced at least a 25% dip in sales from a year earlier in at least one quarter. For the loans to be forgivable, they must prove at least 60% of the funds were spent directly on employees in the form of wages and/or benefits. Some new benefits allowed under the second bill, like group life and disability payments, go beyond the original CARES Act stipulation of “group health care benefits.”

The remaining 40% of funds can be used for a wide array of business expenses, from rent and mortgage interest to supplier costs and COVID-19 worker protection.

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