Here at Long & Long, LLC we believe that small businesses are what drive the American economy. The COVID-19 crisis has caused many small businesses in Pennsylvania to close amid much uncertainty. While much has been made of the Senate’s stimulus package that passed this week, those programs are not yet available as the House and President Trump still must approve that plan prior to it becoming law. However, if you are a small business or a non-profit and are struggling due to the COVID-19 pandemic, there are other government programs available to help your business during these times:
1. On March 19th, Governor Tom Wolf announced the availability of low-interest loans for small businesses and eligible non-profits in Pennsylvania through the U.S. Small Business Administration (SBA). These loans are specifically designed to help small businesses deal with the loss of revenue they are experiencing due to the COVID-19 crisis. The interest rate on these federally backed loans at 3.75% for small business and 2.75% for non-profits.
2. On March 25th, Governor Wolf announced a new relief fund for small businesses. The COVID-19 Working Capital Access Program (CWCA) will provide loans up to $100,000 for small businesses. This loan program is administrated through a Pennsylvania state program and has a 0% interest rate for the life of the loan. Most for-profits businesses with less than 100 full-time employees are eligible for this loan.
Below are our key questions and answers to help our small business clients navigate both the SBA and CWCA small business loan programs.
As always, Long & Long, LLC is available to assist you during this unprecedented and challenging time. We are already well versed in both the SBA and CWCA loan programs and looking forward to assisting you and your business in potentially applying for a small business loan. We will keep our clients updated as new details become available on the federally funded stimulus package.
What is the difference between the SBA loan program and the CWCA loan program?
The CWCA loan has a lower interest rate and small businesses with existing credit are eligible to apply. The SBA loan is a federally funded loan, while the CWCA is administrated by the Pennsylvania Industrial Development Authority.
How are repayment terms determined?
The SBA Repayment terms are determined on a case-by-case basis, but in general the SBA offers long-term repayment options. The CWCA is offering a three year repayment term with a 12 year amortization, meaning that at the end of the third year, if not paid in full, a balloon payment will be owed. Neither loan requires payment during the first year.
What can the loan be used for?
The SBA loan and the CWCA loan are both designed to help small businesses pay for operating costs.
Will the loan require collateral?
The SBA loan could require small businesses to put down some collateral to be eligible for the loan but it is decided on a case by case basis. The CWCA loan requires a blanket lien on all business assets currently owned or acquired in the future, further the loan must be personally guaranteed by an individual or entity with at least a 20% ownership interest.
How can I apply?
The application process is very different for both loans. The SBA loan application is submitted through the federal government, while the CWCA loan must be submitted to your county’s Certified Economic Development Organization.