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The Coronavirus Aid, Relief, and Economic Security (CARES) Act offers businesses access to a wide array of programs to help weather the coronavirus pandemic. Besides grants, tax credits and deferrals, many people are interested in loan programs, most notably the Paycheck Protection Program (PPP) loan. What fees and costs are associated with CARES Act loans?
The 880-page CARES Act package, enacted March 27, included programs to support both for profit and nonprofit businesses. Starting April 3, qualified small businesses may apply for loans from the Paycheck Protection Program, part of the CARES Act stimulus package signed into law last week. Here is the link to a sample application to prepare your request. As of April 5, we understand that SBA has begun accepting a limited number of applications, but funding has not started yet.
SBA certified lenders will process loan applications, at no fee to the borrower. Lenders, including, national banks, community banks and credit unions, were flooded with requests for some of the $350 billion set aside for this. Businesses are encouraged to work with a lender with whom they have an existing relationship as most lenders are not accepting new customers for this loan.
Another reason to work with a banker you already work with is to avoid becoming a victim of fraud. As noted in this Inc.com article, many opportunistic individuals and companies may try to scam your business. FDIC-insured and traditional SBA lenders are expected to be up to speed on the process, versus those who need to apply to become a preferred lender.
The U.S. Treasury recently provided guidance that indicated borrowers can use agents to help process the loans. The agents will be paid by the lender from the lender’s fee from SBA. Based on the loan approval process, it is not clear what necessary services an agent would provide. Using an agent also likely requires you to provide your payroll and other financial information to the agent so they can submit the application to the lender on your behalf.
As mentioned above, there are no fees or costs associated with CARES Act loan programs. Programs like the Paycheck Protection Program were created so that businesses will not pay application, closing or package fees. If you work with a company promising a way to fast-track your loan for a small fee, let that be a red flag.
Consult with a financial or business legal professional to determine whether or not you qualify for one of the CARES Act programs and to offer advice on navigating the changes, rules and requirements. And remember, besides appropriate professional advice to make sure the loan is right for your business, there are no fees to process CARES Act loans or applications.