The federal government is helping businesses weather the coronavirus crisis.
Businesses can pursue Economic Injury Disaster Loans or apply for the Payroll Protection Program.
Ask yourself these eight questions to determine which of the two primary government assistance programs for COVID-19 relief would best help your company navigate through the pandemic and position you to grow after it passes.
1) How much would you like to borrow?
You could borrow as much as $2 million through the Economic Injury Disaster Loan (EIDL) program or $10 million from the Payroll Protection Program (PPP), which was funded with $379 billion from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. A PPP loan would not exceed eight weeks of prior average payroll plus 25% of that amount.
If you need funds quickly, the Small Business Administration (SBA) would advance you as much as $10,000 through the EIDL program. You could get it within three days and would not have to pay it back if you are denied a loan.
2) How would you use the loan?
You could use an EIDL loan for payroll as well as fixed debts, accounts payable, and other bills. PPP loans cover payroll expenses as well as mortgage interest, rent, and utility payments.
3) When would you repay the loan?
Your first payment for an EIDL loan would be due in a year. You would start repaying a PPP loan in six months. Interest would accrue on either loan during the deferment.
4) How much interest would you pay?
Businesses pay 3.75% interest annually on EIDL loans, which mature in as many as 30 years. PPP loans charge 0.5% annual interest for two years.
5) Would you like to pursue loan forgiveness?
A PPP loan could be fully forgiven if you use at least 75% of the proceeds for payroll and you maintain staffing and salary levels. EIDL loans are not eligible for forgiveness.
6) Would you be willing to make a personal guarantee?
PPP loans don’t require a personal guarantee or collateral. Personal guarantees for EIDL loans of less than $200,000 have been waived through the CARES Act.
7) Would you want to work with a lender or the government?
The SBA lends directly to businesses through the EIDL program. The PPP resembles the SBA’s 7(a) loan program in that you would work with your bank.
8) Would you be eligible to apply?
The EIDL serves mostly businesses with fewer than 500 employees, though you may be able to have more depending on SBA Size Standards for your industry. It is open to any business that has been affected by the impact of the COVID-19 pandemic. You can be located in any state or in Washington D.C. or a U.S. territory. Similar guidelines apply for PPP loans.
With the PPP, you may also be able to apply for assistance for each store if you are a small business in the hospitality and food industry that has more than one location with fewer than 500 workers.
Both the EIDL and PPP programs may be able to help your business through the coronavirus pandemic. Choose the right federal disaster loan assistance program for COVID-19 relief for you.
Contact ROARK to learn more about federal disaster loan assistance programs for COVID-19 relief and how we can help you choose the right loan for your business.