What You Need to Know About COVID-19 Small Business Loans

April 2, 2020 | by Kevin J. Gienger, CPA

There is a lot of uncertainty in our world and businesses right now. Thankfully our people are all well and working hard to stay on top of the current changes in laws and find opportunities to help you stay in business in order to keep your people employed

The expanded options through SBA loans are one of those opportunities. These loans will provide cash to help your company. While the details of these loans are developing quickly we would like to share with you what we know now and encourage you to check back on our website for updated information. 

What Loan programs are available? 

There are multiple programs under the SBA that have been expanded by legislation passed last week.   Current legislation has waived some of the normal requirement of these loans.   

Economic Injury Disaster Loans 

You can apply directly to the SBA for Economic Injury Disaster Loans (EIDL).  These loans are for business directly affected by COVID-19.  They provide cash to pay payroll, debt or other operating expenses. EIDL loans are low interest (capped at 3.75% ) and offer up to 30 year repayment terms.  Payments are deferred up to 12 months.   

You can apply directly to the SBA by clicking here.

*Note Ag business are not eligible for these loans and should work with the USDA Farm Services Agency. 

Paycheck Protection Program Loans 

The SBA as well as business banks will be administering this new very advantageous loan program. These loans could be 100% forgiven if you use the proceeds to pay wages, benefits, rent, utilities and meet other requirements. The amount of the loan that is not forgiven will be at 1% interest amortized over 2 years. No collateral or personal guarantee is needed. The loan is intended to cover these expenses through June 30th. The loan has a two year repayment, but no payments are due for the first 6 months (but interest will accrue)  and there is no prepayment penalty. We believe it is best to apply directly to your bank they will begin to take applications as soon as April 3, 2020.


Do I qualify ? 

To qualify you must have: 

  • Less than 500 employees average over the last 12 months. (an exception exits for some food service business to have more than 500) 
  • You can also be a self-employed person including a sole proprietor or independent contractor 
  • A 501c(3) Nonprofit with less than 500 employees.
  • Your business was in operation on January 31, 2020 

What information do I need to apply? 

The SBA loan application form is on their website. 

  • Your 2019 payroll costs for your business showing each employees gross pay.
  • NOTE – FICA and Medicare taxes are NOT eligible payroll costs.
  • Federal 941 Payroll Reports for the 4 quarters of 2019
  • Copies of your IRS Form W-3 and W-2’s for 2019
  • Proof you were in business on 2-15-2020

Some banks may also request:

  • Your 2020 payroll costs for your business showing each employees gross pay.
  • Business tax returns
  • Personal tax returns (for owners owning more than 20%)

What if I am self-employed and I don’t have employees?

You may still qualify for a loan but the rules are still being developed in this area.  The SBA has provided guidance that you can use Form 1099 MISC, records of income and expenses or documents like bank records to demonstrate qualifying payroll.

How much can I borrow ? 

The loan is based on the average payroll costs over the twelve months of 2019. Payroll costs include wages, state and local payroll taxes, employer paid health and retirement benefits. Wages do not include payments made to independent contractors. You must reduce the total of the above expenses by the amount of wages paid over $100,000 to any individual employee or owner in 2019. The average monthly amount of payroll multiplied by 2.5 is the maximum amount of the loan up to a cap of $10 million.

A quick way to estimate the amount you can borrow.  

  1. Find your four quarterly 941 payroll reports for 2019.
  2. Add up the numbers in Box 2 for each quarter. 
  3. Add to this number your employer paid health insurance for 2019 
  4. Divide the total by 12 
  5. Multiply that number by 2.5   

How does loan forgiveness work ? 

First, the amount of your loan that is forgiven is not taxable income. The amount of loan forgiveness is based on the ability of the business to maintain employee count and wages paid compared to the period of 2-15-2019 through 6-30-2019 from the prior year. Both principal and accrued interest are eligible to be forgiven. However, if you have already reduced headcount you can re-hire those employees prior to June 30, 2020.

The amount of the loan forgiven may be reduced if: 

  • Current FTE count is reduced.
  • Wage paid to employees that make less than $100,000 annually is reduced by more than 25%.
  • Also note that at least 75% of the loan should be used to pay payroll related costs and can not be used to pay employee sick pay that qualifies for tax credits under COVID-19 Emergency Paid Leave. Again payments made to independent contractors are not considered wages.

Loan proceeds used to pay the following expenses are eligible for forgiveness: 

  • Payroll and related expenses for 8 weeks following the loan origination date (not to exceed $8,333.33 in salary per month to any one employee)
  • Rent paid between March 1 and June 30, 2020
  • Utilities for services between March 1 and June 30, 2020
  • Mortgage interest paid between March 1 and June 30, 2020


We recommend you contact your business bank and apply for these loans if you have already experienced or project negative economic impacts to your company from the current pandemic. We are here to support you in the loan application process. We can provide tax returns directly to you over secure email and we can help you answer the loan officers questions.

Please contact your client manager for help.  We appreciate your business and your patience as we work to find answers to your questions.     



Paycheck Protection Plan – Emergency funding to offset coronavirus impacts on your business

SBA Snapshot – Federal programs helpful for many business