There has been a lot of talk about the new SBA loans but I think it is important to make sure you have the truth about these programs.
There has been $349 Billion approved for these loans. It is not known how long these funds will last or if any additional funds are added to that amount.
The PPP (Paycheck Protection Program) is already covered pretty well on this site although we still don’t know when the SBA and the banks will have the details worked out so they can start processing applications. It was supposed to happen on April 3rd but they are still haggling over the details.
Right now, I want to give you some information about the EIDL (Economic Injury Disaster Loan). This program, like the PPP, is for businesses and includes sole proprietors with and without employees, as well as independent contractors.
It is intended to be used as working capital for businesses. The money can be spent on fixed expenses, payroll, accounts payable and other bills that could have been paid if the disaster had not happened. It cannot be used to pay down long-term debt, such as mortgages or equipment loans or leases.
The maximum loan amount is $2 Million with the funds intended to be used for working capital, including payroll and fixed expenses. The interest rate is 3.75% for businesses and 2.75% for non-profits. The term can be up to 30 years. The first payment is not due for one year but interest will accrue during that time.
This loan also has up to a $10,000 advance opportunity built into it. When you fill out the application, you can apply for the advance which can be given even if you do not get approved for the loan. If you get the advance and the loan, the $10,000 (or whatever amount you receive) will be deducted from the loan amount.
The $10,000 has been well publicized but the regulations state that you can get up to that amount. There is no guarantee of any specific amount. Regardless of whether you get the loan or not, the advance does not have to be paid back.
One difference between the EIDL and the PPP is that the EIDL can be based on a credit score while the PPP is not. Amounts above $200,000 require a personal guarantee with the EIDL.
You can apply for both loans but the money cannot be used for the same thing. In other words, you can’t double dip. To do so would be to invite trouble with the government and you don’t want that.
The only way to apply for this loan is by going directly to the SBA (Small Business Administration). The link for applying is here: SBA EIDL Application