A Tire Dealer' Guide to Small Businesses Loans For Coronavirus Relief

The Auto Care Association distributed the following information April 1 on key loans available to small businesses in response to COVID-19, which could help tire dealers manage their cash flow needs.

Congress has now provided billions of dollars for small business loans and credits to help employers keep their employees on payroll, even though COVID-19 has had such a devastating impact on cash flow. If your business has 500 or fewer employees, then it will qualify as a small business for the purpose of these loans. The two prominent loans currently offered to small businesses under COVID-19 relief legislation are the Paycheck Protection Program (PPP) loans and the Economic Injury Disaster Loans (EIDL).

Paycheck Protection Program (PPP)

Qualifying entities are eligible for up to 250% of their average monthly payroll cost during the period between Feb. 15 and June 30, 2020, according to the Auto Care Association. The loan amount is capped at $10 million. These loan amounts can be used for employee compensation, annual or sick leave, payment of retirement benefits, payroll taxes and payment of interest on mortgage obligations, rent, utilities and interest on pre-existing debt obligation.

The Auto Care Association says what makes the PPP program particularly advantageous is that your loan may be forgiven by the federal government. The federal government will forgive eight weeks of covered expenses to help you and your business. For any remaining amount not forgiven, the maximum loan term is 10 years and the maximum interest rate is 4%.

It is important to note that the amount of your loan will be reduced if there is a reduction in staff or if you’ve reduced salaries by more than 25%. However, if you take action before June 30, 2020, to bring those employees back on payroll, and/or restore salaries that had been cut by more than 25%, then you can ensure that you will receive your maximum loan forgiveness.

Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders, according to the U.S. Treasury Department.

Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.

For FAQs regarding the Paycheck Protection Program, click here.

Economic Injury Disaster Loans (EIDL)

Prior to the creation of the PPP program, the Coronavirus Preparedness and Response Supplemental Appropriations Act, which was Phase 1 of the virus legislation actions, declared that coronavirus is deemed a “disaster” for eligibility purposes of Economic Injury Disaster Loans (EIDL). EIDL are low-interest loans of up to $2 million that are available to pay for expenses that could have been met had the disaster not occurred. Unlike the PPP loans, EIDL are not restricted to covering expenses for the period of time from Feb. 15 to June 30. Within this program, there is a $10,000 grant that does not have to be repaid, to provide small businesses with quick, much-needed capital. The $10,000 will be disbursed within three days of receiving the EIDL application. You may apply for an EIDL directly with the SBA.

This EIDL grant will be taken into consideration when calculating an entity’s PPP loan forgiveness amount. Further, you cannot use two SBA loans for the same purpose. For example, if you use your PPP to cover payroll for the eight-week covered period, you cannot use a different SBA loan product, such as an EIDL, for payroll for those same costs in that period. If an entity has already applied for the EIDL they may convert it into a PPP loan for a limited period of time.

Companies can find additional helpful information through the following resources: