April 5, 2020

04/05/20: Loan Programs Available to Small Business Owners due to COVID-19

*Special thank you to Alysha Keck for contributing to this article.

In response to the COVID-19 virus pandemic, the Federal Government, through the Small Business Administration (SBA), and the Minnesota Department of Employment and Economic Development  (DEED) have created or modified a number of loan programs to aid small businesses to overcome the challenges created by this health crisis and to offer relief.  Business owners are encouraged to speak with their legal and tax advisors to determine if they qualify for any of these programs.

Federal Programs:

  • Economic Injury Disaster Loan (EIDL) and Advance
    • EIDL offers up to $2,000,000 to businesses that are currently experiencing a temporary loss of revenue. The first payment is deferred for 12 months, interest rate is 3.75% for small businesses and 2.75% for nonprofits, and can be extended over 30 years. The loan amounts may be used to pay fixed debts, payroll, accounts payable and other bills that cannot be paid because of the COVID-19 pandemic impact. A loan advance of up to $10,000 also available, even if the business EIDL application was declined or still pending.  The loan advance will not have to be repaid. The EIDL and advance is available to any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private nonprofit organizations, and 501(c)(19) veterans organizations.  Applications can be found here. Advance funds will be made available within three days of a successful application.


  • Paycheck Protection Program (PPP)
    • The Coronavirus Aid, Relief, and Economic Security (CARES) Act created the Paycheck Protection Program (PPP) that provides SBA loans to allow businesses to keep their workforce employed during the COVID-19 crisis. It is available for any small business with less than 500 employees (including sole proprietorships, independent contractors and self- employed persons), private non-profit organization, and 501(c)(19) veteran organizations.  The loan may be fully forgiven if the funds are used for payroll, rent, mortgage interest, or utilities (75% of the forgiven amount must have been used for payroll) during the 8-week period after the loan is made.  Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels and is reduced if full-time headcount declines or salaries and wages decrease. Loans can be up to 2.5 times the employer’s average monthly payroll costs, not to exceed $10,000,000.  The loan terms will be the same for everyone, including payments deferred for six months, a maturity of 2 years, interest rate between 1.0-0.5%, and no collateral or personal guarantees are required. The government and lenders will not charge any fees.  Business owners can apply through any existing SBA 7(a) lender, federally insured depository institution, federally insured credit union, or Farm Credit System institution that is participating. On April 3, 2020, lenders may begin processing applications. The PPP will be available through June 30, 2020. A link to the borrower application form can be found here.


  • Express Bridge Loan
    • The SBA Express Bridge Loan enables small businesses who currently have a business relationship with an SBA express lender to access up to $25,000 quickly. This program is useful for small businesses who have an urgent need for cash while waiting for a decision on an EIDL and can be repaid in full or part by the proceeds from the EIDL.  Eligible business must have been operating when the COVID-19 disaster was declared by Governor Walz on March 21, 2020 and must meet all other SBA Section 7(a) requirements. More information on the Express Bridge Loan can be found here.


  • Debt Relief
    • SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans issued prior to September 27, 2020 for a period of six (6) months. If an employer’s disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020. Interest will continue to accrue on the loan. Regular 1201 monthly payment notices will be mailed out, which will reflect that the loan is being deferred and no payment due.  The deferment will not cancel any established Preauthorized Debit (PAD) or recurring payments on your loan. Borrowers that prefer to continue to make regular payments during the deferment period may continue remitting payments and the SBA will apply those payments as if there was no deferment. After deferment period, borrowers will be required to resume making regular principal and interest payments.  More information about the SBA debt relief can be found here.


Minnesota Programs:


  • Small Business Loan Guarantee Program
    • The Small Business Loan Guarantee Program is intended to incentivize the private banks to make loans to small businesses by providing an 80% loan guarantee for loans up to $200,000 made by lenders in the program. The program is available to Minnesota businesses with fewer than 250 employees.  Funds may be used for machinery or equipment purchases, maintenance or repair, expenses related to moving into or within Minnesota, or working capital when working capital is secured by fixed assets.  The loans are available by lenders enrolled in the program.  Further information about the Small Business Loan Guarantee Program available here, including a list of approved lenders.


  • Unemployment Insurance Shared Work Program
    • The Unemployment Insurance Shared Work Program is a Minnesota Unemployment Insurance program that offers an alterative to layoffs and allows employers to divide available hours of work among a group of employees. Partial unemployment insurance benefits are available for employees working reduced hours.  By avoiding layoffs, employers maintain an experienced and trained workforce, avoid future hiring and training costs, and are able to quickly increase operations when business conditions improve. Further information about the Shared Work Program is available here.


  • Pandemic Unemployment Assistance Program
    • A new program was authorized by Congress to provide Unemployment Insurance benefits to those who otherwise do not qualify, such as independent contractors and self-employed individuals. Each state must create the program before it can be implemented. According to the Minnesota DEED, more information will be available soon and payments could take up to several weeks. Check the DEED website here for updates on the program availability.

Contact us at Segal Duffek Moen if you have any questions about these programs.   We remain open and fully available to serve you remotely.