Small Business Interruption Loan

These are SBA 7(a) loans that have been authorized for the SBA to lend to small businesses as part of the Coronavirus Aid, Relief and Economic Securities (CARES) Act.

Any business with 500 or fewer employees can apply.  The business does not have to be completely or partially shutdown.  Any business that applies is presumed to need the loan.  The company must have been in business on February 15, 2020 and had employees from whom wages and salaries were paid.  Self-employed and independent contractors are also eligible.

As these are SBA guaranteed loans, businesses must apply through their respective banks and credit unions.  Start this process as early as possible.  These loans will be very popular as they are forgivable (meaning you don’t have to pay it back) if used for very specific costs (payroll, rent, utilities, interest on debt prior to February 15, 2020).

Normally forgiven debt will be includible in a taxpayer’s income, but this specific loan forgiveness are not includible in taxable income.

The maximum loan you could receive is equal to 2.5 times the average payroll cost during the 1-year period before the loan was originated.  Payroll costs are broadly defined, but there are definitions as to what will and will not qualify for payroll costs.  Check with your bank’s underwriting department for these defined costs.

As this is only a synopsis of the loan program’s highlights and not a detailed analysis, we encourage every business to contact their financial institution discuss the best SBA loan product that meets their specific need.

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