With the Economic Injury Disaster Loan and Paycheck Protection Program being funded again by Congress, we thought it would be a good time to give an update on these programs and how you can apply. If this article doesn’t answer all of your questions, check out our website or sign up for Business Impact NW services for free with our business trainers and coaches.
Economic Injury Disaster Relief Loan
A loan with a maximum of $2 million to help businesses affected by the COVID-19 shut down. The interest rate is 3.75% for for-profit businesses and 2.75% for nonprofits.
What you will need to apply:
- Gross revenue for the 12 months prior to 1/31/2020
- Cost of goods sold 12 months prior to 1/31/2020
- For property rental organizations: disclose rents lost due to disaster
- For nonprofits: disclose cost of operations for the 12 months prior to 1/31/2020
- Any compensation from other sources and a description, such as insurance or other relief programs
- Information about all owners with at least 20% stake in business
Link to application https://www.sba.gov/funding-programs/loans/coronavirus-relief-options
You can also download and print the application but please apply online if possible because the paper application takes longer and is less accurate. You can find information here.
The EIDL Advance is part of the application process for the EIDL. Through this program, you can access up to $10,000 based on the number of employees your business has as of Jan 31 2020 at $1k per employee.
If approved, funds will be sent to you within 3 days (from approval.)
If you already applied, you can apply again and ask for the advance.
The Advance is basically a grant, because you don’t have to repay it even if the application is denied.
After submission, watch your email and junk mail folder and your phone for calls and messages for a response. You may have to provide more information such as:
- Personal financial statement of owners with more than 20% share
- Schedule of Liabilities/Tax transcript request form
Frequently Asked Questions:
How long will it take to receive funds?
There is no clear answer, no guidance for how long it takes to get approved.
If you applied before March 30, go back and apply again.
If my credit isn’t great, should I still apply?
Yes—the guidance is to apply; the SBA is very flexible. And even if you don’t qualify for the loan, you can still get the advance
Should I apply?
This question is entirely up to you, but you can get help from a business coach. Sign up here.
To check the status of your application:
Call 800-659-2955 or email disastercustomerservice@sba.gov
Paycheck Protection Program
This is a US Small Business Administration program to help businesses keep workforce employees during the COVID-19 crisis. The loan is forgivable if you meet certain milestones and criteria. The purpose is cash-flow assistance, maintain payroll including hiring of employees so that small businesses are ready to continue when things go back to normal.
Eligibility:
Any small business as defined by the SBA in operation on 2/15/2020, generally businesses with fewer than 500 employees, including:
- Sole proprietorships
- Independent contractors
- Self-employed individuals
- Non profit organizations
- Veterans organizations
- Tribal businesses
- Hospitality and food industry businesses with more than 1 location (not more than 500 employees per location)
The PPP provides a forgivable loan of up to $10 million.
How can you use it?
It is recommended that you very carefully follow these guidelines if you want the loan to be forgiven.
- Payroll costs including benefits
- Mortgage interest
- Loan interest
- Rent
- Utilities
- Refinance of an EIDL given between 1/31/2020 and 4/3/2020
Payroll can include:
- Salary, wages, commissions, or tips: No greater than $100k per employee
- Employee benefits
- Vacation, parental, family, medical, or sick leave
- Allowance for separation or dismissal
- Group health care including insurance premiums
- Payment of retirement benefits
- State and local taxes assessed on compensation
How much is the loan?
Up to 2 months of your average monthly payroll costs plus an additional 25% for a maximum of $10 million. (2.5% of 1 month)
Rule of thumb, take the average of the monthly payroll costs for the period 2/15/2019-6/30/2019.
Or, if you were not in business during that period, the average monthly payroll costs in the period 1/1/2020-2/29/2020.
Your lender will give you guidance on how to make the calculation.
Loan Overview:
- No collateral or personal guarantees
- Loan fees waived
- Loan maturity: 2 years
- Interest rate 1%
- Limit: 1 loan
- Loan payments deferred for 6 months
- No pre-payment penalties
How to apply:
With any SBA 7(a) lender, federally insured depository institution or insured credit union and farm credit systems accepting applications.
You can check online for eligible lenders: www.sba.gov/paycheckprotection/find
Your lender will provide you with information on documenting your payroll expenses.
At Business Impact NW, we ask for the SBA application form and most recent payroll and bank statements for February and March, but please ask your lender what they require.
What do you need to apply?
The expenses you will use these loan funds to pay and the number of employees you have.
How much will be forgiven:
8 weeks for funds covering eligible payroll costs, mortgage interest, rent, and utility costs incurred after receiving funding. This is based on maintaining or quickly rehiring employees and maintaining salary levels. It is required that you certify this when you apply.
How long do I have to rehire or restore my full-time employees?
Until June 30, 2020.
Can I get EIDL and PPP?
Yes, you can apply for both, but PPP and EIDL cannot be used for the same purpose. You don’t have to apply for both and if you apply and are approved, you have no obligation to accept funds.
If PPP is approved, when will the funds be received?
Lenders must make disbursement 10 calendar days after approval.
How do I request loan forgiveness?
Request forgiveness from your lender with proof of qualification. This is why it is very important to track expenditures very carefully.
Where can I locate the PPP application and lender information?
www.sba.gov/funding-programs/loans/coronavirus-relief-options
I have questions about my PPP application. Who do I ask?
The contact information is the same as EIDL: Call 800-659-2955 or email disastercustomerservice@sba.gov
At Business Impact NW, we realize that this is an incredibly trying time for small businesses. We offer our most up to date information on these programs here, but please contact us or the SBA for more updates. If you need help with these loan programs, or other information and advice for your business, please sign up for our free webinars and Q&A sessions. If these don’t answer your questions, please send them to apphelp@businessimpactnw.org or sign up for a free 1-on-1 business coach.
Business Impact NW is committed to helping small businesses through the COVID-19 crisis and recovery, especially those who don’t have access to commercial banks and are from traditionally underserved communities. If you need information, advice, or access to funds for your small business, please don’t hesitate to contact us. We are here to help.
Please take care of yourselves.
About the author
Greta Stough
Greta Stough is the Director of Development and Communications at Business Impact NW. She has a passion for sharing the work we do here in compelling ways. Prior to joining Business Impact NW, Greta operated her own consulting business, The Cabra Group, for over a decade, focusing on nonprofit development, community planning, grants and fundraising. Prior to that she was the Director of Development for the Suquamish Tribe. She has an undergraduate degree from Oberlin College. She did graduate work in Planning at NYU, living for five years in Brooklyn and enjoying diverse food, culture, and music. Greta enjoys hiking, cooking for her family, classic film, and playing with her English Cocker Spaniel, Scooter.