This time last year, it was business as usual for the Growth Capital team working with small businesses to identify and obtain the right Small Business Administration (SBA) loans and Community Advantage loans.
Within weeks, however, business as usual was anything but.
The COVID-19 pandemic began to affect small businesses. Some closed to comply with shut-down orders, while others saw business decline as customers cut spending.
The federal government came to businesses’ aid with the Paycheck Protection Program (PPP), and the Growth Capital team dived into the new small business loans program. Within weeks, the team processed $67 million in PPP loans for hundreds of small businesses.
For some of these companies, Growth Capital’s work made the difference between barely surviving and thriving.
Small Business Loan Successes
Here are some examples of how Growth Capital helped small businesses benefit from SBA pandemic loan programs:
- One small business that lost all new revenue after complying with the shut-down order faced the choice of paying off existing loans or making payroll and other expenses. The Growth Capital team helped the business owner defer payments to an existing SBA loan, freeing up business funds for other needs. The team also recommended investigating the Economic Injury Disaster Loans available through the SBA.
- The team made a big difference for a small insurance company, promptly guiding the business owner through the PPP loan application and loan forgiveness process.
- A landscaping business owner was surprised and grateful for the team’s fast action on processing a PPP loan and forgiveness.
Growth Capital continues to identify small business resources that benefit clients. For example, the team is currently working with small businesses that could be eligible for the most recent round of PPP loans.
Small Business Resources
In December, Congress approved an additional $284 billion in PPP loans for small businesses that did not obtain a loan during the first round or that needed additional funds. Eligible small businesses are non-profit organizations, veterans’ organizations, tribal concerns, the self-employed, independent contractors, and sole proprietors. There are two loan categories—First Draw Loans and Second Draw Loans. Below is an overview of these loans and the loan forgiveness process:
First Draw PPP Loans
Small businesses may be eligible for First Draw PPP Loans if they meet the following requirements:
- The business has 500 or fewer employees.
- The borrower needs funds for payroll and benefits, rent, mortgage interest, utilities, and worker protection costs related to COVID-19.
The borrower may be eligible for full loan forgiveness if:
- The business maintains employee and compensation levels.
- The loan is spent on payroll costs and other eligible expenses.
- At least 60% of the loan is used for payroll during the 8-to-24-week period after the PPP loan was disbursed.
Second Draw PPP Loans
Small businesses that received a PPP loan may be able to borrow up to $2 million in Second Draw Loans by meeting the following requirements:
- The business employs 300 or fewer employees.
- The business can demonstrate that gross receipts declined by at least 25% between comparable quarters in 2019 and 2020. Declining receipts can be documented with financial statements, tax return information, other financial records, or borrower attestation.
- The borrower has used or will use the full amount of the First Draw PPP Loan for authorized purposes.
The borrower may be eligible for full loan forgiveness if:
- The business maintains the same employee and compensation levels required for the First Draw PPP loan.
- Loan proceeds are used for payroll and other eligible expenses.
- At least 60% of loan proceeds are spent on payroll.
- All requirements are met within eight to 24 weeks after the loan is disbursed.
Additional Small Business Resources
Small businesses are still weighing the pandemic’s impact and potential additional government aid. A third stimulus plan is currently under consideration, and the Growth Capital team is monitoring negotiations between Congress and the Biden Administration.
The plan, dubbed the American Rescue Plan, includes $440 billion for small business and essential service support. Small business support will be in the form of grants and low-cost capital to help entrepreneurs create and maintain jobs.
But while negotiations continue, the Growth Capital team is back to its usual business—the business of helping its customers find the right program to make their business dreams come true.
To contact the Growth Capital team, call (216) 592-2332 or fill out our online contact form. We look forward to learning about your business and how we can help!