SBA Loans May Help Salons & Spas Impacted By COVID-19

With non-essential businesses being forced to close across the U.S., we know many of our U.S. clients are being financially impacted by the COVID-19 pandemic.  However, help may be on the way.

On March 27th, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The CARES Act includes the Paycheck Protection Program (PPP), a $350 billion loan program managed by the Small Business Administration (SBA).  The PPP is designed to provide a direct incentive for small businesses to keep their workers on payroll by providing each small business a loan up to $10 million for payroll and certain other expenses, which may be forgivable if certain requirements are met.

While the SBA is expected to release guidance on how to apply for a PPP loan soon, some of the key provisions of the program have been released.  Here are some important aspects of the program:

Paycheck Protection Program

• Temporarily raises the maximum loan amount from $5 million to $10 million during the “covered period” (February 15, 2020, through June 30, 2020).  The maximum loan amount will be equal to the lesser of $10 million or the sum of 2.5 times the average monthly payroll cost in 2019, which includes wages for employees as well as expenses for paid sick leave, health care, and other benefits.
• Temporarily confers eligibility to businesses (even sole proprietorships and independent contractors) with 500 or fewer employees, regardless of whether a business qualifies as “small” under the SBA’s size standards.
• The maximum interest rate for these loans is now capped at 4 percent.
• Waives the requirement that businesses show they can’t obtain credit elsewhere.
• Businesses won’t need to provide a personal guarantee or collateral in order to obtain a loan.
• Expands the permitted use of funds to include payrollsupport, paid sick leave, mortgage payments, rent payments, and servicing existing debt.
• Any portion of the loan used to make payroll, pay for utilities, rent, mortgage, and existing business debt may be forgiven, dollar for dollar.  In order to receive this dollar-for-dollar loan forgiveness, however, employees need to remain employed through the end of June.

In order to take advantage of the newly enacted PPP program, we strongly encourage our U.S. clients to contact their local SBA office, which you can find on the SBA website by clicking HERE.  We’ll update our clients as new information becomes available.

Be safe.  We are all in this together.