What You Need to Know About COVID-19 Small Business Loans
The COVID-19 health crisis has made life very hard for many people. Millions of jobs and small businesses are being threatened by the COVID-19 health crisis and the economic crisis it’s causing. If your small business is in trouble, there is help. The Small Business Administration (SBA) and Congress have put together special loans and grants to help you get through this difficult time.
Economic Injury Disaster Loan Emergency Advance (EIDL)
All small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will hopefully not have to be repaid. Learn more and apply for the Economic Injury Disaster Loan Emergency Advance.
Paycheck Protection Program (PPP)
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if money is used for qualifying expenses, including payroll, rent, mortgage interest, or utilities. Non-payroll forgivable costs will be limited to 25% of the total amount of the amount forgiven. This program is underfunded and likely will expire soon, so apply as soon as possible.
Most major banks/credit unions have already started accepting applications. If possible, apply through an institution that you already have a relationship with, as most are prioritizing pre-existing clients. The lender will be approving the loan and the forgivable amount, not the SBA. It is critical to determine how the lender will expect you to track expenses in order for them to approve the forgiveness. Most banks and credit unions will be participating, check with your local one to see. You should talk to your local bank or credit union whether they are participating in the program. Stay tuned here and here for more information, as program requirements are evolving.
SBA Express Bridge Loans
This loan allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. Learn more about this loan, which can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan.
SBA Debt Relief
The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months. The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020. Get the details to see if this loan can help you.
ANSWERS TO SOME COMMON QUESTIONS:
Q: How do I get these loans?
A: Apply for the Economic Injury Disaster Loan directly from the SBA here.
Paycheck Protection Loans are government-backed but will come from private banks. You should inquire at your local bank about these loans. The Treasury Department has just released the loan application. You can see it here. You will still need to apply for the loan at your local bank. This is just the application.
Q: How much can I borrow?
A: The Economic Injury Disaster Loan from the SBA can be up to $2 million working capital for up to a 30-year term at 3.75% (2.75% nonprofits). Not everyone will qualify for that amount.
The Paycheck Protection Loans can be for 2.5 times your average monthly payroll or $10 million— whichever is less.
Q: Do I need to repay these loans?
A: You must repay the Economic Injury Disaster Loan from the SBA. Some portion of this loan (up to $10,000 may be turned into a grant). Payments can be deferred for one year after the origin of the loan.
All or some of the Paycheck Protection Loan may be forgiven, depending on the rules of the program. There are specific requirements about how you spend the loan and if you continue to employ your workers in order for it to be forgiven. Read them here.
Q: Can you apply for both loans?
A: Yes. You can apply for and receive both loans, but you cannot receive funds from both loans for the same purpose.
Q: Do I need good credit to qualify for these loans?
A: The Paycheck Protection Loan requires no collateral and no personal guarantee. The Economic Injury Disaster Loans are given based on credit scores. No tax returns are required. You can borrow up to $200,000 without a personal guarantee.
Q: What if I’ve already fired or laid off my employees? Do I still qualify for a Paycheck Protection Loan?
A: Your loan may be forgiven if you bring back employees and restore wages generally within 30 days and maintain them through June 30.
Q: My bank doesn’t seem to know anything about the Paycheck Protection Loan. Now what?
A: Banks are currently working out the details but should be ready now. You do need to apply for these loans through a private bank.
Q: Can self-employed workers and freelancers apply?
A: Paycheck Protection Loans are available to 501(c)(3)s, self-employed, sole proprietors and independent contractors. SBA Economic Injury Disaster Loans are available to small businesses and nonprofits (including faith-based) with fewer than 500 employees, sole proprietors and independent contractors.
Additional Resources & Help
Our Rise & Thrive Small Business Emergency Relief Fund is also available for entrepreneurs who are part of the skysthelimit.org community.
The CASE Center at Duke University has put together this regularly updated dashboard of small business relief programs that’s worth checking out.
As always, we’re by your side and we’ve put together some information to help you through this situation. We’ll get through this together!