Updated 4/7/2020
Adjustments to Economic Injury Disaster Loans (EIDLs) as approved by CARES Sec 1110 • Loans below $200,000 will be approved without a personal guarantee.
• Businesses open <1 year can apply for these loans if they were in operation on January 31, 2020.
• Loans can be made based solely on credit scores with no tax returns required. This decision is at the discretion of the SBA.
• Loans are available to nonprofits, sole proprietors with or without employees, or independent contractors
• Nonprofits include any private nonprofit including charitable organizations such as churches and private universities.
• The covered period is January 31, 2020 through December 31, 2020.
Emergency Grants approved by CARES Sec 1110
• A loan applicant can request an advance of up to $10,000 after application. The SBA is to provide this grant within 3 days of receiving the applicants request. • The emergency grant is disbursed to each company at $1,000 per company employee up to a maximum of $10,000. • The grant must be spent on employee paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments, or repaying obligations that cannot be met due to revenue losses.
• An applicant shall not be required to repay the advance even if the applicant is denied a loan.
• If approved for a Paycheck Protection Program loan (PPP), any forgiveness from that loan will be reduced by the amount of the grant.
• $10,000,000 has been approved for these emergency grants
SBA Economic Injury disaster loans
Here are the loan advantages:
1. SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
2. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
3. SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
The applications are piling up fast so the sooner you can get your application in the quicker it will get processed. The CARES Act approves all US counties as eligible to obtain these loans.
To submit a request click here.
You will need your business information, your most current business tax return, and info on your personal assets and debts. A personal guarantee is required for all loan amounts.
EIDLs do not replace lost sales or revenue. These loans are used to pay fixed debts, payroll, accounts payable and other operating expenses.
Funds Can NOT be used for:
· Dividends and bonuses
· Disbursements to owners, unless for performance of services
· Repayment of stockholder/principal loans (with exceptions)
· Expansion of facilities or acquisition of fixed assets
· Repair or replacement of physical damages
· Refinancing long term debt
· Paying down (including regular installment payments) loans provided by another Federal agency including the SBA or SBIC
· Payment of any part of a direct federal debt (including SBA loans) except IRS obligations
· Relocation
Who can apply?
- A Small business is defined as <100 employees or <$50 million Revenue
- No preference for type of firm - All businesses should apply including nonprofits, sole proprietors with or without employees or independent contractors (CARES Sec 1110)
- Nonprofits include any private nonprofit including charitable organizations such as churches and private universities.
- No minimum time for a business to be open to apply
- A personal credit score minimum of 650 has been waived; SBA will determine loans on a case by case basis
- If you have multiple businesses (separate EIN#) you can apply for each one by filling out a separate application
- For corporations, partners with greater than 20% ownership interest may have to submit tax returns
The Loan
- The loan amount will be determined by the SBA.
- All loans are 30 year terms; The SBA has not provided guidance if you can prepay
- The interest rate is fixed at 2.75% not-for-profit; 3.75% for profit
- You don’t have to start making payments for 1 year from loan origination, however, interest starts accruing on day 1
- Loans less than $25,000 do not require collateral
- Loans over $25,000 you are required to pledge whatever collateral you have - home equity, leasehold improvements, business equipment.
- Apply before using all other credit sources (LOC, credit cards, etc.)
- As an example, a $25,000 30 year loan at 3.75% would have a $115/month loan payment.
Timeline
- If approved, there is no obligation to take the loan
- Decision will be made within in approximately 21 days after application submitted. You may hear from an SBA loan officer if there are questions on the application.
- The loan documents will be mailed to you
- Once you mail back signed loan documents; expect payment within 1 to 2 weeks.
Additional resources
SBA EIDL Application:https://covid19relief.sba.gov/#/ Contact info for SBA: #800-659-2955
disastercustomerservice@sba.gov https://disasterloan.sba.gov/ela/
Feel free to reach out to Paula, Molly, or me with any questions. Also continue to follow EDGe on social media and on our EDGe blog for updates on other small business assistance measures.
Eric Glymph Financial Strategist / Founder EDGe Business Planning www.EDGeBusinessPlanning.com