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The Loan Lowdown: Tips for getting the money your business needs today

by Hannah Stiff | Apr 13, 2020 1:45:40 PM

PPP? EIDL? SBA? IRS?  

If you’re confused by the alphabet soup financial
help programs, you’re not alone. As the government works with banks to hand out
$2.2 trillion in individual and business help under the CARES Act, you likely
have questions about what you qualify for and where to apply.

The Paycheck Protection Program is a loan
that was established in the wake of COVID-19 to help businesses keep their
employees on payroll during the crisis. In a nutshell, the Small Business
Administration will forgive PPP loans if “all employees are kept on the payroll
for eight weeks and the money is used for payroll, rent, mortgage interest, or
utilities.”

To apply for a PPP loan, you must do so through an
existing SBA 7(a) lender, federally insured institution or credit union. So,
start by calling the bank where you currently have your business accounts.

Ask your account manager if they can help you
apply for a PPP loan. If they are not a participating lender who can help, ask
your banker for a referral to a financial institution that can help you.
Try to get both email and telephone numbers for another bank so you can quickly
get help. Be aware that many banks are helping existing customers with PPP
applications before they take on new customers. Before calling your financial
institution, gather the following information: 2019 income and expenses,
balance sheets, and payroll expenses.

You do not need to put up collateral for a PPP
loan and you will not have to pay the government or your lender any fees
associated with the loan. Under the PPP loan, small Businesses can borrow up to
2.5 times their average monthly payroll from the previous year. Businesses with
less than 500 employees per location are eligible to apply.  

The SBA has indicated that loan funds are
available through PPP until June 30, 2020. Hurry to apply as lenders began
processing PPP loan applications on April 3, and money is distributed on a
first come, first served basis.  

The other loan you’ve been hearing about is the Economic
Injury Disaster Loan
, aka EIDL. While disaster loans, also a product
of the SBA, are not forgiven, there is good news for businesses. A new
provision has been added to EIDLs to allow businesses to get a $10,000 advance
if they are struggling financially. This $10,000 grant money does not need to
be paid back. Businesses can receive the grant in a few days.

Small business can apply for more EIDL funding –
up to $2 million that can be used to “provide working capital for expenses such
as fixed debt and payroll costs,” according to the SBA. The interest rate for
EIDL loans (not including the $10,000 grant money) is 3.75% with a loan
term up to 30 years. New stipulations for EIDL loans include a one-year
deferral on repayments (though interest does begin accruing when the loan money
is given out). Business owners can receive up to $25,000 in EIDL loan money
with no collateral required.

To apply for an EIDL loan, you must allow the SBA
to review your business tax records. You do not need a lender to help you apply
for an SBA loan, simply visit sba.gov.

** If this article interestes you, your Better Business Bureau Northwest + Pacific is offering a free webinar with an SBA loan expert on Thursday, April 16 at 2:00 p.m. To register for this webinar and get answers to your questions on SBA loans, visit trust-bbb.org/coronavirus.

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