What is a COVID-19 loan and how do you get one?
Small business loans in response to the Coronavirus/COVID-19 pandemic.
Government documents are huge, sort of scary, contain little to no type hierarchy, and the idea of combing through one might make you want to cry. At the same time, they’re really important and can help you out. All of the information regarding the COVID-19 small business loans is no exception.
Attribution: The Austin Chronicle
We’ve done a lot of reading on these loans, and hopefully, can extend our proverbial hand to you. Here’s what you need to know, in case you need the help.
What is the SBA?
The U.S. Small Business Administration exists to provide support to entrepreneurs and small businesses. That’s us.
What is an EID loan?
EID stands for Economic Injury Disaster (Exhibit A: COVID-19) During this crisis, the SBA has made EID (Economic Injury Disaster) loans available. With the help of these loans, small businesses (500 employees or less) can keep operations as smooth as possible.
What is the purpose of the EID loan?
These loans are being made available so that small business owners can perform essential tasks, i.e. paying fixed debts, paying your vendors and paying your employees. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
How much can I receive?
The program allows for loans up to $2 million, depending on your business.
How long do I have to pay back the loan?
SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years.
What documentation do I need to provide?
The actual SBA application, it’s pretty straightforward.
Once you're finished with that, there will be an IRS form.
Personal financial statement: assets and liabilities, network calculations, or real estate that's owned.
Scheduled liabilities: who you owe, how much you owe, when you owe them, along with any security interest that they may have.
Supporting documentation: any additional narrative or financial information that you feel will help establish your economic loss.
You can find links to all those forms along with instructions here.
How long until I receive the money?
The funds are expected to be available in about 30 days. Once the application is sent in, the SBA recommends waiting 1-2 weeks before inquiring into the request status.
BONUS: Forgivable loans
In addition to the EID loans provided by the SBA, there are also funds allocated for forgivable loans, which may be more applicable for your business.
What are forgivable loans, specific to the response to COVID-19?
The SBA will also oversee the Paycheck Protection Program. This program will distribute $350 billion to small businesses that can be partially forgiven under specific circumstances. “The SBA loans strike a balance between loans on favorable terms and grants by providing forgiveness to firms that use loaned funds for payroll, rent, mortgage interest, and utility payments,” said Garrett Watson, senior policy analyst at the Tax Foundation, a Washington, D.C.-based think tank.
These loans will be administered by banks and other lenders.
These loans can be up to $10 million, based on how much the company paid its employees between Jan. 1 and Feb. 29 and will carry an interest rate up to 4%. If the loan funds are used for the approved purposes and the business maintains the average size of its full-time workforce based on when it received the loan, the principal of the loan will be forgiven, and the company will only need to pay back the interest accrued.
If either of these loans is something your small business is interested in, apply sooner than later. There are over 30 million small businesses in America! We’re all trying to stay afloat. So get as close to the front of that line as you can. It may be just what you need to keep things rolling.
