Grants & Loans During COVID-19

Many small businesses owners are under a lot of stress between trying to keep their business afloat and tackling the stresses they are likely experiencing on a personal level. Economic Injury Disaster Loan (EIDL) EIDL and Paycheck Protection Program (PPP) are programs that have been enacted in order to help small business owners, yet in many cases, there has only been added confusion. With new deadlines in place, it is important to build understanding and familiarity with the program for those seeking to partake. Let’s break down the basics of each program.

Economic Injury Disaster Loan (EIDL) and Advance

The EIDL loan is for small businesses and agricultural businesses and is aimed to provide relief for those experience a loss of revenue due to COVID-19. There is a difference between the loan and the grant. The loan cap is $2 million (the actual amount you receive is based upon the financial losses you have incurred), The grant cap is $10,000 ($1,000/employee). The loan must be paid back, while the grant does not. Key factors to consider:

1. Loans less than $25,000 require no collateral.

2. Loans less than $200,000 require no personal guarantee.

3. Approval can be based upon credit score

4. The SBA is required to review your business tax records

5. The loan interest is 3.75% with a 30 year term

6. Repayment is deferred for a year, but interest in accrued upon disbursement

7. You keep the grant money even if you do not qualify for the loan.

Paycheck Protection Program (PPP)

With this program having recently been extended, it is important to understand eligibility and application associated with it. The PPP is intended for small businesses and provided up to 24 weeks of payroll and benefit costs coverage. The funds can also be utilized to cover costs associated with mortgage interest, rent, and utilities. Here are the key factors to keep in mind:

1. Small business with 500 or less employees are eligible, with companies with more than 500 employees in specific industries also being eligible

2. Funds are disbursed as loans that can be FULLY forgiven IF the company receiving the loan

   1. Maintains or quickly rehires employees

   2. Maintains salary levels

   3. At least 60% of the funds received are applied to payroll costs

3. Loan payments are not made until 10 months after your coverage period or your forgiveness application is processed

4. Loans made prior to June 5th have a 2 year maturity rate, while loans made after June 5th have a maturity rate of 5 years/

5. If your loan is forgiven, it becomes a non-taxable grant

6. No fees are charged and no collateral/personal guarantees are required

7. The cap for the loan is your average monthly payroll in 2019, times 2.5. The maximum amount is $10 million.

8. The extension signed on July 4, 2020 also extended the application deadline. The new deadline is August 8, 2020

You can (and should) apply for both of these programs if your business has experienced adverse effects from the pandemic. Fighting to prosper as a small business is never easy. The current climate has made staying afloat exponentially difficult. A little assistance goes a long way.