During this unprecedented time, many childcare facilities are unsure about the future. This series of blogs covers ways to help our audience navigate this confusing time. As childcare centers navigate the events occurring in response to COVID-19, the Small Business Administration (SBA) has multiple programs available to help.
Economic Injury Disaster Loan (EIDL)
In order to qualify for an EIDL, your school must be in an area covered by a disaster declaration. You can determine if you are in an area covered by a disaster declaration by visiting this site: https://disasterloan.sba.gov/ela/Declarations/Index
If you are in a disaster area, then you will need to apply for an EIDL. You can submit the application here: https://covid19relief.sba.gov/#/. This is an online, step-by-step application.
To be prepared, have these items on hand:
- Your most recent tax return
- Business formation documents (such as your LLC agreement or articles of incorporation)
Note that the website underwent a major overhaul recently and many users have reported slowness, so be patient. Expect to hear back from the SBA in about 3 weeks. If your application is approved, then you will work with the SBA to determine the amount of a loan for which you qualify, up to $2 million, and the terms of repayment.
Advance on an Economic Injury Disaster Loan (EIDL)
After you have completed the EIDL application (https://covid19relief.sba.gov/#/) you will also qualify for a $10,000 advance, issued before your application is reviewed, and possibly forgivable at a later date.
You must submit the current application on the EIDL site to qualify for the advance. If you submitted the older application, you must re-submit an application using the new format to qualify for the advance. You can determine if you submitted the old application by looking at the PDF copy, in the top right corner of the first page for “OMB No.: 3245-0017” which is the form ID for the old application. If you are not interested in the advance, and you submitted the old application, then you don’t need to submit the new application.
Payroll Protection Act Loan (PPAL)
As part of the CARES Act, the government has authorized businesses to borrow 250% of their average monthly payroll up to $10 million. Specifically, you will qualify for 250% of the average monthly payroll expense, including employer paid taxes and employer paid benefits, but excluding any compensation to an employee in a payroll period that exceeds $100,000 on an annualized basis.
Unlike EIDL, the PPAL program will be administered by private banks rather than the SBA. Private banks that are current “SBA 7a” lenders will most likely participate, and other banks may participate as well. All banks are currently waiting on the SBA to publish final rules and guidelines for the program. The SBA has indicated that those rules will be published in the next 1-2 weeks. After the rules are published, banks will open applications.
Based on reading the law, you can be prepared by having records for your total payroll by employee for the past 12 months as well as the past 12 months mortgage, rent and debt payments. You will also want to keep records of all payroll payments, by employee, starting now through June 30 to qualify for loan forgiveness. The specific terms of the loan will be finalized with the lender. We will publish an updated blog post when the SBA publishes its guidelines with more actionable information.
Find Local Assistance
In addition to the information above, the SBA has a tool to find business counsels in your area. Visit: https://www.sba.gov/local-assistance/find/