Raymond L. Ruff, SBA Payroll Protection Program

Simplified process offers loans that can be forgiven

The U.S. Small Business Administration is offering help to businesses struggling to make payroll during the COVID-19 pandemic.

“Our small businesses are the economic engines of their communities, and the SBA is ready to provide them with the support they need to remain open and keep their workers employed,” SBA Administrator Jovita Carranza said in a statement issued Monday.

“With our whole-of-government approach led by the President, we are providing small businesses with the resources they need to get them through this unprecedented time.”

The $350 billion Paycheck Protection Program will provide up to $10 million to pay workers for two months. The loans, with an interest rate of 0.5%, mature in two years. But the loan will be completely forgiven if all employees are kept on the payroll and the money is used for payroll, rent, mortgage interest, or utilities.

“With the problems the economy has suffered you’ve seen a lot of companies that have to shut down, have to lay off workers. This program is meant to try and soften that, try and combat that,” said Raymond L. Ruff, a partner at Phillips Lytle LLP.

The program, which is available through June 30, is open to businesses with less than 500 employees along with private nonprofit organizations affected by coronavirus.

Businesses in some industries with more than 500 workers can qualify for the program if they meet SBA size standards for those industries.

Small businesses in the hospitality and food industry with more than one location could also be eligible at each store and location if the individual store or location has less than 500 workers. Businesses in the hospitality industry were not eligible for SBA loans in the past, but they are included in the Payroll Protection Program.

“I think the reason for that is kind of clear. Those have been the industries that have been hit the hardest — the travel industries of hotels, restaurants, bars, and leisure. They’ve been hit terribly hard,” said Ruff.

Businesses can apply through federally insured banks and credit unions or Farm Credit System institutions that are participating. More lenders are expected to be added.

Lenders can start processing loan applications on Friday. Ruff said the loan application process has been simplified.

“If there has ever been a criticism of the SBA program it’s been the application process is challenging, or the eligibility process is challenging. They’ve tried to clear off all those hurdles and they’ve made the application process very simple for these loans,” he said.

“This is an example of the SBA really trying hard to make it easy, or easier, for companies to get this money,” Ruff said.

Loan payments will be deferred for six months. No collateral or personal guarantees are required. And businesses won’t be charged any fees.

Loans will be fully forgiven if the funds are used for payroll, mortgage interest, rent, and utilities. At least 75% of the forgiven amount must have been used for payroll.

The amount of the loan forgiven will be reduced if the number of employees is reduced, or if salaries and wages are decreased.

“It’s a powerful thing. It’s not like the company is coming out of this whole thing with a million dollar loan that they’ve got to pay back,” Ruff said.