Arizona small companies, nonprofits and sole-employee businesses financially hurt by the COVID-19 shutdown now can file applications for forgivable loans for up to two months of payroll and other operating costs.
The federal government last Friday opened the application process for the new Paycheck Protection Program (PPP). It is designed for businesses and nonprofits with 500 or fewer employees. That includes part-time workers.
Since the program launched five days ago, banks have been flooded with loan applications across Arizona and the U.S.
“We’ve got bankers pulling overnighters to get this program going,” said Steven Killian, director of government relations for the Arizona Bankers Association. “It’s a mad rush. There’s one door in and one door out. With the logistical issues, we’re still sorting through it all, but I think at the end of the day it’s going to work out.”
Killian has a couple of key points to make the process smoother for borrowers.
Contact personal bank first
Those seeking the loans should go through the bank they use for their business or their personal bank, he said. If they do not have a bank that is qualified to lend under the program, the association has compiled a list of banks to pick from as well as other resources on its website at: azbankers.org.
Be ready with required documents
With the crush of applications and bank lobbies closed, it’s important to have essential documents like furlough and unemployment records and financing documents in hand when meeting with a bank.
To get started, here are some answers to most common questions about the PPP:
Businesses and nonprofits with less than fewer than 500 employees, including full-time, part-time and any other status can apply including:
• A 501(c)(3) organization
• Sole proprietor
• Independent contractor
• Self-employed who regularly carries on any trade or business
• A tribal business concern
• A 501(c)(19) veterans organization
In addition, special rules may make a business or individual eligible:
• If a company is in the hospitality and food services sector, the 500-employee rule is applied on a per- location basis
• If a business is operating as a franchise or receives financial assistance
from an approved Small Business Investment Company Borrowers will need to complete the Paycheck Protection Loan
How do the forgivable loans work?
While the majority of business costs are totally forgivable, any portions that aren’t will be capped at a 1 percent interest rate. No collateral or personal guarantees are required.
Borrowers won’t get hit with fees from the government or from the lender, either, and loan payments will be deferred for six months.
Program streamlined to be fast and easy
The program is designed to issue funds as quickly and as easily as possible. Lending institutions that are in the Small Business Administration’s 7(a) program can process loans, but so can any other FDIC-approved bank or credit union.
The Treasury Department and the SBA have each set up websites with helpful overviews at (Treasury, SBA), including the sample application.
The U.S. Chamber or Commerce also created a checklist and guide in English and Spanish.
Patience may be required initially
Killian, who referred to getting the program running was like “trying to build a rocket ship without a manual” because it is new and the sheer number of applicants.
“Whether you are talking about big, huge multinational banks like Bank of America or Wells Fargo, all the way down to the small community banks, they are trying as best as they can to keep up with the demand of their clients,” he said.
As of Wednesday, Bank of America reported 250,000 applications had been filed, collectively seeking $40 billion. JP Morgan Chase had received 375,000, amounting to about $40 billion as well. Loan amount requests have ranged from $4,000 to $2.6 million, Chase executives told national leaders during a White House briefing.
In his recent annual letter to shareholders Monday, Chase CEO Jamie Dimon, stated that the bank is ready to go to extraordinary lengths to help clients.
“It is in the toughest of times that we need to use our capital and liquidity to help clients – large and small. COVID-19 is one of those extraordinary times,” Dimon said.