The CARES Act (H.R. 748) authorized two Small Business Administration (SBA) programs providing federal money to allow you to keep your employees on payroll during the COVID-19 emergency and can provide low-interest loans with no personal guarantee.

These programs were funded with over $350 billion. There should not be an issue of the funding running out for these loans and grants, however, there is an overwhelming demand for them and individuals who submit their applications later will likely face delays in processing their applications.

Paycheck Protection Program (PPP)

This is a loan equal to 10 weeks’ worth of payroll costs (excluding employees who make over $100k) that converts into a grant if the borrower keeps all pre-crisis (before Feb 15th) employees on the payroll through an eight week period after the loan is granted. If employees are laid off, borrowers are responsible for a portion of the loan proportional to the salary of the laid-off employees. A full conversion from loan into a grant can occur if the borrower eliminates the reduction in employees and wages by June 30th, 2020. Any business with less than 500 employees may apply.

You will need to apply through your own bank if they are qualified SBA lender. See your bank’s website to determine whether they are a qualified SBA lender.

The PPP loan application and more information are available on the U.S. Department of Treasury site. Lenders may begin processing loan applications as soon as Friday, April 3, 2020. Contact your SBA lender ASAP for more information.

Economic Injury Disaster Loan (EIDL)

These are up to $2 million loans with a maximum fixed interest rate of 3.75% and loan terms of up to a maximum 30 year repayment period to be used to meet costs such as payroll, rent, mortgage etc, that cannot be met as a result of the COVID-19 crisis. Terms are determined on a case-by-case basis based on the borrower’s ability to repay. No personal guarantees required. Collateral is required for loans of over $25,000 but the SBA will not decline a loan because of lack of collateral and will only require applicants to pledge collateral that is available.

There is currently a nationwide disaster declaration and small businesses in all U.S. states and territories are eligible to apply. In addition to applying for the EIDL loan, when submitting their EIDL application, applicants can also apply for a $10,000 loan advance. This “loan advance” is paid out within three days of a successfully submitted application and does not need to be repaid, even if the pending EIDL application is subsequently denied.

These loans are administered directly through the SBA, not through your bank. The application can be found here.

About Towing and Recovery Association of America, Inc.

Founded in 1979 in Kansas City, Missouri TRAA is the umbrella trade group and national voice of the towing and recovery industry, which is estimated to include more than 35,000 towing businesses in the United States. TRAA’s membership includes professionals from the United States, Canada, Japan and New Zealand. TRAA is a 501 (c)(6) nonprofit membership national towing association, governed by a representative board of directors whose officers are elected from the membership.

TRAA represents the interests of the towing and recovery industry on Capitol Hill, sponsoring annual events and meetings that are attended by members as well as state association officers and leaders. TRAA also produces an array of educational products supporting professionalism in towing and recovery and in business management.

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