Update: On April 21, Congress and the White House reached an agreement on a $484 billion COVID-19 aid package. This measure was needed after the $349 billion small business loan program known as the Paycheck Protection Program (PPP) was depleted of funds. Highlights include $310 billion of additional lending authority for the PPP, $50 billion for the Economic Injury Disaster Loan (EIDL) Program, and $10 billion for EIDL grants. We will keep this page updated to reflect any changes as we learn more.
During this challenging time, many child care providers are in need of additional financial resources and supports due to COVID-19 related closures and loss of income. That’s why we wanted to share some information regarding new federal programs that offer providers the opportunity to receive funding through the Small Business Administration (SBA). These programs include:
- Paycheck Protection Program (PPP)
- Economic Injury Disaster Loan (EIDL) and EIDL grants
- Express Bridge Loans Pilot Program
Paycheck Protection Program (PPP)
The federal Paycheck Protection Program (PPP) is an emergency “forgivable loan” program. That means that employers who borrow through the PPP are eligible to have a portion, or even all, of the loan forgiven assuming that they adhere to program regulations. Essentially, the PPP allows employers to borrow up to 2.5 times their average monthly payroll costs.
The proceeds of the resulting loan can be used for the following activities:
- Payroll costs for employees including healthcare and retirement costs
- Rent payments
- Mortgage interest payments (but not mortgage prepayments or principal
- Interest payments on other debt incurred before February 15, 2020
- Utility payments
PLEASE NOTE: at least 75% of any PPP loan must be spent on Payroll Costs in order for the entire loan to be forgiven. Using more than 25% of PPP loan proceeds on non-payroll costs will lead to a reduction in the amount of the loan that is forgiven. Any amount borrowed that is not forgiven will be owed to your lender. The loan will be fixed at 1% and due in 2 years. Interest payments will be deferred for the first six months. If you are not sure how to calculate your average monthly lost profit or average monthly payroll costs for employees, do your best to estimate them. Your bank will go through these numbers with you. Be sure to ask about how much of the loan will be forgiven for the first eight weeks, and how much of the loan you will have to pay back.
See the U.S. Treasury’s Paycheck Protection Program “fact sheet” for more detailed rules and guidance: https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf
If you decide to pursue a PPP loan you will need to find a participating lender to speak with. We recommend you check with your financial institute first, but if they are not currently providing this service you can search for the nearest SBA approved PPP lender by entering your zip code here: https://www.sba.gov/paycheckprotection/find
Although the program is open until June 30, 2020, if this is an opportunity you would like to pursue, we encourage you to apply as quickly as you can because there is a funding cap and lenders need time to process your loan.
If you have received a PPP loan:
- Consider opening a separate bank account for the funding if you can in order to ensure you are documenting and able to more easily report on how these funds were spent when it comes time to request forgiveness;
- Track your spending of PPP funds – there are templates available such as this one (click here to download) shared by TSNE; and
- Document how you have used these funds – to apply for forgiveness, you will submit documentation to prove you used funds for allowable purposes and in the required amounts – click here for some suggestions on loan forgiveness documentation.
Economic Injury Disaster Loan (EIDL)
Alongside the Paycheck Protection Program, the Economic Injury Disaster Loan (EIDL) is a possible way to help cover certain costs during this challenging time and you can apply now to receive this money through the SBA. You do not have to talk to a banker. Fill out an online application form through the SBA. Click here to access the application form.
Here are some key facts about this loan from the NAEYC’s fact sheet for child care providers:
- The EIDL is a low-interest loan directly administered by the SBA for up to $2 million per business that can be extended for up to 30 years. Please note that high demand may mean that loans are approved at significantly lower amounts than $2 million.
- The business must intend to use the loan for existing expenses that are otherwise difficult to pay at this time. While you can use it for payroll, it is a particularly good option if your business has debts outside of payroll that you need help covering.
- As part of applying for the EIDL, your business may be able to receive up to a $10,000 advance to help you cover expenses within a few days; even if you don’t get the EIDL, you will still get to keep the advance up to $10,000 as a grant.
- Except for the up to $10,000 advance, which is expected to be treated as a grant, the EIDL cannot be forgiven, unlike the Payment Protection Program (PPP) loan. You will have to pay the EIDL back, with interest.
Read the rest of the NAEYC’s info sheet on EIDL for child care providers here: https://www.naeyc.org/sites/default/files/globally-shared/downloads/PDFs/resources/topics/naeyc_eidl_for_child_care.pdf
If you need help in filling out this application form, we recommend reaching out to the SBA at 1-800-659-2955 or email firstname.lastname@example.org. Whether you fill out the online application form or contact the SBA by phone or email, you may have to wait a while for your application to be processed during this crisis. We know this can be frustrating, but it will require patience.
SBA Express Bridge Loans Pilot Program
These loans allow small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. They can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan.
If your business has an urgent need for cash while waiting for decision and disbursement on an Economic Injury Disaster Loan, it may qualify for an SBA Express Disaster Bridge Loan: Express Bridge Loan Pilot Program
The NAEYC’s webinar which includes information on these programs, Paying Yourself, Your Staff, and Your Bills: Helping Child Care Programs Understand and Navigate SBA Loan Options, has been recorded and can be found here: https://register.gotowebinar.com/recording/5780694883809473292
We hope this information is helpful; however, we understand this can be a challenging and frustrating time, so please reach out to the LISC Child Care Facilities Fund team at email@example.com if you have any questions at all.
Please note that the information provided here may change subject to additional legislation and/or guidance from Congress and the SBA. This article is for informational purposes only and should not be considered legal advice.