Covid-19 relief loans for manufacturing industries are what will sustain their future.
Manufacturers have been in the front lines of providing essential needs for healthcare workers, consumers, and for the development of treatments during this Covid-19 pandemic.
The National Association of Manufacturers (NAM) conducted a survey where 80% of manufacturers predict that the pandemic will have a negative financial impact on their business. Adding to the problem is that most manufacturing jobs cannot be performed remotely, but onsite. Oil prices and demand have continued to drop, there are bottlenecks in the supply chain, and anxiety is ruling the “credit market.”
The manufacturing sector has been a keystone of the U. S. economy. Its future prosperity depends largely on how well it can endure the massive impact of the current health crisis.
Current Relief Available For Manufacturers
Manufacturers can turn to the SBA for assistance for the following program:
Paycheck Protection Program (PPP)
With its origins within The Coronavirus Aid, Relief, and Economic Security Act (CARES), the PPP is a program where $350 billion has been allocated to provide U.S. small businesses with funding for 8 weeks. It comes in the form of “100 percent federally guaranteed loans”. These loans are supported by the SBA and here are some of the program’s benefits:
- All small businesses qualify
- The maturity rate of the loan is 2 years and an interest rate of 1%
- No loan repayments for the first six months
- No personal guarantees or collateral required
- No fees
- It covers expenses for a total of eight weeks from the date of the loan
- The loan can be converted into a “non-taxable” grant
Seventy-five percent of the funds must be used to settle payroll and the cost of employee benefits. The remaining portion or 25% can be spent on utilities, rent and lease payments, and mortgage interest payments.
If you adhere to the above guidelines, you will have the loan 100% forgiven.
The highest loan amount that you can receive is calculated by your average monthly payroll cost in 2019, multiplied by 2.5. The maximum amount is $10 million.
Although the SBA does not lend you the loan, it offers to “back” the loan that the lender issues. You can find an eligible SBA 7(a) lender on the SBA website and apply for the loan directly with them.
The documentation needed to substantiate your payroll expenses include:
- Payroll tax filings
- Payroll processor records
- Form 1099-MISC records
- Schedule C for sole proprietorship
- Payroll tax forms for the year 2019 (Forms 941, 940, and W-3)
Borrowers are welcomed to apply with more than one lender of their choosing. Whoever completes your application first will issue you an SBA approval number for your particular business. The number is known as a PPL. The SBA can only give one PLP for every Tax ID.
Looking Ahead
Without question, the manufacturing sector continues to suffer the impact of the coronavirus pandemic at an alarming rate. It is important to stay informed with federal and national organizations that are mobilizing to help the manufacturing industry.
Keep all important documentation at the ready if the government injects more funding by way of loans and grants into the struggling economy. Anything would be of help in addressing the immediacy of this crisis.