How Small Businesses Can Get Loans and Debt Relief
How Small Businesses Can Get Loans and Debt Relief
The following was initially prepared before the SBA issued its guidance for the Payroll Protection Program (PPP). It has been updated on April 1, 2020 to reflect the new guidance. Any subsequently issued guidance or further legislative activity may not be
Through a couple pieces of recently enacted legislation, small businesses affected by COVID-19 now have access to more financial assistance.
Below is a high-level overview of each type of aid. Refer to our comparison chart to see what options might work best for your small business and how you should apply.
- Economic Injury Disaster Loan*— Through the Small Business Administration, borrowers could get an emergency loan advance of $10,000 through an EIDL.The SBA will make those funds available within three days of a successful application, and small businesses won’t have to pay the money back. This loan advance is on a first-come-first-served basis, so small businesses should apply right away. In addition to the $10,000 advance, small businesses can also apply for an EIDL of up to $2 million.
- Paycheck Protection Program*— PPPs will be available through SBA preferred lenders with applications becoming available as soon as April 3, 2020. The program offers as much as $10 million through 100-percent federally guaranteed loans to small business employers who maintain their payroll during the COVID-19 emergency. The government may forgive the loans if employers use them for payroll, rent, utilities, and mortgage insurance during the covered eight-week period. Small businesses can apply for an EIDL and a PPP, but the funds can’t be used for the same expenses.
- Express Bridge Loans — Small businesses that already work with an SBA Express Lender also have access to $25,000 — with less paperwork — through the Express Bridge Loan Pilot Program.
- Local Bridge Loans — Many communities are offering emergency loan programs to help small business owners bridge the gap until government support arrives. In Rapid City, South Dakota, Elevate Rapid City announced that it’s offering loans for as much as $15,000 per eligible business.
Through its Debt Relief Program, for six months, the SBA will cover all loan payments for certain non-disaster loans, in particular 7(a), 504, and microloans.
The SBA will pay for principal, interest, and fees. This relief will also be available to new borrowers who take out loans within six months of the bill becoming law.
There’s no need to apply for this debt relief; the SBA will apply it automatically.
If you need funding now or think you may need it in the future, apply now. You’re under no obligation to take the loan. There are no guarantee fees, servicing fees, or prepayment fees.
All of this new legislation has a lot of details and nuances. So, make sure you’re talking to your accountants, tax experts, and lenders.
We understand this is a time of uncertainty and fear for many small business owners. Every day, there’s a new financial question or concern. Download our free small business action checklist to help you navigate some of the uncertainty.
*As of 4/27/2020, applications for the Paycheck Protection Program have been reopened with the additional funding passed by Congress through the Paycheck Protection Program and Healthcare Enhancement Act on 4/24/2020. On 5/4/20, the SBA reopened the EIDL application process for agricultural small businesses only on a limited basis. Other new applications for the Economic Injury Disaster Loans are not currently being accepted yet, per the SBA, as they process the loans already in the queue on a first come, first-served basis.
This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.
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