Breaking Down the SBA Loan For Small Businesses
Crow Shields Bailey P.C.
BREAKING DOWN THE SBA LOAN FOR SMALL BUSINESSES: WHAT YOU NEED TO KNOW
Are you a small business that has heard about Small Business Association (SBA) loan, but doesn’t know where to start? Or if you’re even eligible? With all the misinformation circulating about the SBA loan, Crow Shields Bailey, PChas broken down the facts so small businesses can be best prepared during this time, including who is eligible, how to calculate the amount you might receive, how the loan can be used, terms of the loan, the loan forgiveness program and application.
SBA loans will be expanded according to recent legislation allocating $349 billion to this program. The eligibility requirements are being relaxed to extend credit to small businesses to help maintain payroll and pay bills (ex. rent, mortgage interest, other interest, utilities) during the ‘covered period.’ Regulations (expected to be final by the first of April) are expected to allow almost any FDIC insured entity to process loans and disburse funds on the same day.
ELIGIBILITY OVERVIEW
When is the ‘covered period’?The ‘covered period’ includes loans made between February 15, 2020 and June 30, 2020. Loans issued during this time are ‘covered loans.’
How do I know if I’m an eligible recipient of a covered loan? Small businesses (fewer than 500 employees or under the SBA NAICS industry guideline, whichever is greater) that have been in operations since February 15, 2020 are eligible for the loan. You must have employees that are paid salaries and payroll taxes and/or pay independent contractors (1099-MISC). Note, if you are a sole proprietor or independent contractor, you are also eligible to receive a ‘covered loan’ providing certain documentation.
CALCULATION OF LOAN AMOUNT
What is the maximum loan I can apply for?The maximum amount you can apply for is the lesser amount of the following options:
· Either $10 million, OR a sum of:
1. Your average total monthly payments for payroll costs incurred for the year prior to the date on which the loan is made (12-week period if you are a seasonal employer), multiplied by 2.5
2. Outstanding amount of existing SBA loans between January 1, 2020 and ending when your new ‘covered loan’ is made available. This will be refinanced under the ‘covered loan.’
(Avg. monthly payroll cost X 2.5) + (Outstanding SBA loans after January 1, 2020)
What do payroll costs include?The sum of payments for any employee compensation; examples include:
- Salary, wage, commission
- Payment of cash tips or equivalent
- Payment of vacation, parental, family, medical or sick leave
- Allowance for dismissal or separation
- Payment required for group health benefits (insurance premiums)
- Retirement benefits
- State or local tax assessed on compensation
If I’m a sole proprietor or independent contractor, how can I calculate payroll costs?In this situation, payments of compensation cannot exceed $100,000 in one year, and are pro-rated for the ‘covered period.’
What do payroll costs NOT include? The following items are not considered payroll costs:
· Compensation in excess of a $100,00 annual salary, pro-rated for the ‘covered period.’
· Taxes imposed on IRC chapters 21, 22, or 24 during the ‘covered period’
· ANY compensation of non-U.S. resident employees
· Qualified sick leave for which a credit is allowed under section 7001, or qualified family leave wages for which a credit is allowed under section 7003 of Families First Coronavirus Response Act
USE OF LOAN PROCEEDS
What can I use the loan for? The SBA loan can be used to cover the following:
· Payroll cost
· Employee salaries, commissions, or similar compensations
· Costs related to continuation of health care benefits during periods of sick, medical or family leave, as well as insurance premiums
· Payments of interest on any mortgage obligations (not including prepayment of or payment of principle on a mortgage obligation)
· Rent and utilities
· Interest on any other debt obligations that were incurred before the ‘covered period’
TERMS OF LOAN AND THE PROCESS OF SECURING THE LOAN
Who has the authority to delegate a loan? Approved SBA lenders are able to make and approve ‘covered loans.’
What are the borrower requirements? The borrower requirements include a "good faith certification” stating that uncertain economic conditions make the loan necessary to support ongoing operations. These funds will be used to retain workers and maintain payroll, rent payments, mortgage interest payments and utility payments. It also is in good faith that the applicant DOES NOT have an application pending for a loan under a 7a loan for the same purpose and duplicative amounts, and no other amounts have been received under section 7a loans between February 15, 2020 and December 31, 2020.
Will I be able to obtain credit elsewhere? The requirement that small businesses are unable to obtain credit elsewhere DOES NOT APPLY to ‘covered loans’ during the ‘covered period.’
What about 7(b)(2) loans? 7(b)(2) loans made after January 31, 2020 can be refinanced as part of the ‘covered loan.’
Will there be nonrecourse? Or collateral needed for this loan? SBA has no recourse (or will demand compensation or payment) against individuals, shareholders, members or partners of an eligible recipient unless the ‘covered loan’ proceeds are used for unauthorized purposes (see above). There are no personal guarantee requirements and no collateral requirements for ‘covered loans.’
What about the interest rate? Interests rates for the SBA loan are not to exceed 4%.
Is there a deferred payment arrangement? Lenders must provide complete payment deferral for a period of not less than six months, including payment of principle, interest and fees. Deferrals are not to exceed one year.
LOAN FORGIVENESS PROGRAM
Is there a forgiveness amount? Any possible forgiveness amount may not exceed the loan amount, and is calculated as the following amount of costs and payments made during the eight-week period beginning on the date of origination of the ‘covered loan’ (‘covered period’):
· Payroll costs
· Payments on interest of any mortgage incurred prior to February 15, 2020
· Rent obligations on leases in force between February 15, 2020
· Utility payments for which service began before February 15, 2020 – electricity, gas, water, transportation, telephone, or internet access
What is the forgiveness amount limited by? The forgiveness amount is limited by the following:
- Multiplying possible forgiveness amount (as calculated above) by dividing average full-time equivalent (FTE) during ‘covered period’ by either of the following:
- Average FTEs between February 15, 2020 and June 30, 2019
- Average FTEs between January 1, 2020 and February 20, 2020
- Note, average FTEs are calculated as the average number FTEs for each pay period
- Amount of any reduction in total salary or wages of ANY employee during the ‘covered period’ that is in excess of 25% of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the ‘covered period’
- Note, this does NOT include any employee receiving compensation in excess of $100K
LOAN FORGIVENESS APPLICATION
What should my application include? The application should include documentation verifying the number of FTEs and pay rates during the ‘covered period’ including:
· Payroll tax filings reported to IRS
· State income, payroll, and unemployment insurance filings
· Documentation of expenses such as rent and utilities
The application should also include certification stating:
· Documentation is true and correct
· Amount for which forgiveness is requested was used for authorized purposes
· Any other documentation SBA determines necessary
Crow Shields Bailey is proudly serving as a resource for small businesses to protect their future during this time. If you have further questions about how the SBA loan can benefit your business, feel free to contact our office 251.343.1012, or visit our Coronavirus Resource Center to stay up-to-date on changes made daily.

- JAN. 2021 - Public Meeting Announced for Special Education
- JAN. 2021 - Alabama Department of Public Health Scheduled to Conduct COVID-19 Vaccination Clinics in Baldwin County
- DEC. 2020 - Jennifer Claire Moore Foundation: Youth Mental Health First Aid Upcoming Training December 14th
- NOV. 2020 - General Election Amendments Breakdown
- OCT. 2020 - SBA Disaster Loans Available to Alabama Private Non-Profit Organizations Affected by Hurricane Sally
- OCT. 2020 - Alabama Road Trips
- OCT. 2020 - Note From the President, Casey Williams
- SEP. 2020 - Eastern Shore Chamber Announces New Dates for Mayoral Runoff Debates in Daphne and Spanish Fort
- SEP. 2020 - Hurricane Resource Guide
- SEP. 2020 - Prodisee Pantry to Hold Mass Emergency Food Distribution Tomorrow in Response to Hurricane Sally
- AUG. 2020 - Your Employee is in Jail SCAM Happening Locally
- AUG. 2020 - New Car Tag to Support Alabama Small Business
- AUG. 2020 - Fairhope Walking School Bus Idling Until Sept. 1
- JUL. 2020 - CAP Releases RFP for Eco-Tourism
- JUL. 2020 - Baldwin County Probate Office Update
- JUL. 2020 - Public Notice Regarding Mandatory Mask Requirement for Circuit Courts in Baldwin County Courts
- JUL. 2020 - Jubilee Festival of Arts Unveils 2020 Festival Poster Artwork by Local Artist Ricky Trione
- JUL. 2020 - Eastern Shore Chamber of Commerce Launches New Tourism Website to Boost Exposure for Local Small Businesses
- JUN. 2020 - Former Fortune 100 Business Leader John Manelos Announces Bid to Become Next Mayor of Fairhope, AL
- JUN. 2020 - Legends in Concert to ReOpen at OWA
- JUN. 2020 - BB&T/Truist PPP by the Numbers
- JUN. 2020 - Baldwin County's May 2020 Housing Report
- MAY. 2020 - 2020 Legislative Session Recap
- MAY. 2020 - COVID-19 Emergency Relief: Guidelines for Payment of Outstanding Sales and Lodgings Tax Liability
- MAY. 2020 - SERVPRO Cleaning Specialist in Daphne Recommends Four Key Things to Look for as Businesses Reopen
- MAY. 2020 - Gov. Kay Ivey Amends Safer at Home Order
- APR. 2020 - Calling All Helping Hands
- APR. 2020 - Infirmary Health Launches Convalescent Plasma Donation Program to Treat Sickest COVID-19 Patients
- APR. 2020 - Local Nonprofits Need Our Help
- APR. 2020 - Guidelines: Opening Up America Again
- APR. 2020 - SAWDC Region 07 Job and Training Opportunities
- APR. 2020 - Baldwin County Covid-19 Impact Report
- APR. 2020 - Free Facebook Training During Lockdown
- APR. 2020 - Prodisee Pantry announces changes to Mass Emergency Food Distribution due to Highway 31 road construction
- APR. 2020 - PPP & EIDL Updates
- APR. 2020 - Bridge the Gap Bama
- APR. 2020 - How is COVD-19 Affecting Your Workforce
- APR. 2020 - Maritime Executive Named Director and Chief Executive of the Alabama State Port Authority
- APR. 2020 - PPE Resources For Businesses
- MAR. 2020 - Breaking Down the SBA Loan For Small Businesses
- MAR. 2020 - Diagnostic and Medical Clinic evaluating all symptomatic persons beginning Monday, March 30
- MAR. 2020 - Emergency Food Distribution at Prodisee Pantry
- MAR. 2020 - Alabama’s 20 Safest Cities of 2020
- MAR. 2020 - Baldwin County Residents Can Receive GED and Occupational Skills Training Online Through Coastal Alabama
- MAR. 2020 - News Release: USA Health Children’s & Women’s Hospital Forms New Partnership to Teach Community Classes
- MAR. 2020 - Remote Access and Best Practices
- MAR. 2020 - Coronavirus (COVID-19) Resources
- MAR. 2020 - 2020 Census to Make Big Difference for Alabama
- MAR. 2020 - Elsa Engeriser Named National Merit Finalist
- NOV. 2019 - Daphne High School to Host Career Fair
- JUL. 2019 - Eastern Shore Chamber Unveils the Featured Artwork for the 31st Annual Jubilee Festival of Arts
- APR. 2019 - Baldwin County Named an ACT Work Ready Community
- MAR. 2019 - 2U Tire Named April Small Business of the Month
- JAN. 2019 - 2019 Baldwin County Career & Job Fair
- NOV. 2018 - 2018 Annual Award Nominations
- NOV. 2018 - City of Fairhope Holds Visual Preference Survey Process to Gather Feedback for Future Development
- NOV. 2018 - Hatch Fairhope Announces Grand Opening
- OCT. 2018 - YOUTH LEADERSHIP BLOG: History & Geography Day
- SEP. 2018 - Alliance Publishing Group Named Eastern Shore Chamber of Commerce Small Business of the Month
- JUL. 2018 - Eastern Shore Chamber Unveils the Featured Artwork for the 30th Annual Jubilee Festival of Arts
- JUN. 2018 - Eastern Shore Chamber of Commerce Wins Communications Excellence Award for Eastern Shore Elf Campaign
- JUN. 2018 - Eastern Shore Chamber of Commerce Publishes Updated Election Guide for Primary Runoff Races
- MAY. 2018 - 2018 Primary Election Guide
- MAY. 2018 - Old Tyme Feed: May Small Business of the Month
- MAR. 2018 - 2018 Annual Award Winners
- JAN. 2018 - A New Year: Where We've Been & Where We're Going
- SEP. 2017 - The Eastern Shore Chamber of Commerce Parts Ways with the Fairhope Arts & Crafts Festival Foundation
- DEC. 2016 - Fairhope Music Opens New Location
- DEC. 2016 - Brandy Rhodes Coaching Now Open in Fairhope
- NOV. 2016 - Congressman Bradley Byrne Addresses Business Community Following the Presidential Election
- SEP. 2016 - Chamber to Offer Leadership Workshop for Members
- SEP. 2016 - Chamber Young Professionals to Host a Cornhole Tournament to Benefit the Spanish Fort Public Library
- JUL. 2016 - The Eastern Shore Guide to the 4th of July
- MAY. 2016 - May Newsletter
- APR. 2016 - Fairhope Resident Named SCORE Mentor of the Year
- APR. 2016 - The April 2016 Newsletter
- MAR. 2016 - Ribbon Cut for AltaWorx
- MAR. 2016 - Spring 2016 Youth Leadership Applications
- FEB. 2016 - Specialized Therapy Services Opens in Fairhope
- FEB. 2016 - ESCoC Governmental Affairs Survey Results
- SEP. 2015 - Joe Hudson’s Collision Center
- SEP. 2015 - BenchMark Physical Therapy
- SEP. 2015 - Sage Lebanese Cuisine & Café
- SEP. 2015 - Shux on the Pier
- SEP. 2015 - Tourism Executive Of The Year Award
- SEP. 2015 - The 27th Anniversary Jubilee Festival
- SEP. 2015 - Youth Leadership 14th Annual Seven-Month Program
- JUL. 2015 - January 2015 Morning Marketing Release
- APR. 2015 - Eastern Shore Magazine 2015
- FEB. 2015 - EASTERN SHORE CHAMBER EGGS N’ ISSUES
- SEP. 2014 - EASTERN SHORE CHAMBER HONORS ENVIRONMENTAL AWARD WINNER Tree Planted at Christ the King School
- SEP. 2014 - EASTERN SHORE CHAMBER EGGS N’ ISSUES June 10 TOPIC: “Economic Update for Baldwin County”
- SEP. 2014 - EASTERN SHORE CHAMBER TO HOLD CANDIDATES FORUM - For Baldwin County Commissioner Candidates
- Jun. 2014 - Eggs n' Issues
- Apr. 2014 - Candidates Forum
- Apr. 2014 - Eggs n' Issues
- Apr. 2014 - Celebrate the Arts
- Mar. 2014 - Eggs n' Issues
- Mar. 2014 - 30th Prayer Breakfast
- Mar. 2014 - Leadership Applications
- Mar. 2014 - Council Lucheon
- Feb. 2014 - Update on I-10 Bridge
- Jan. 2014 - Update on I-10 Bridge
- Nov. 2013 - Eggs N' Issues - Onespot
- Oct. 2013 - Student Art Competition
- Oct. 2013 - E.S.C. Seeks Local Artists
- Oct. 2013 - Candidate Forum Release
- Oct. 2013 - What's Going On in AL Legislature
- Jul.2013 - Mardi Gras Schedule - 2014