SBA Economic Injury Disaster Loan (EIDL)

The U.S. Small Business Administration (SBA) is offering low-interest Federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the coronavirus (COVID-19). Here are some facts about the loans:

• Small business owners in all U.S. states and territories are currently eligible to apply for such loans.
• The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
• These loans offer up to $2 million in assistance for small businesses experiencing a temporary loss of revenue.
• The loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of COVID-19’s impact.
• Small businesses are encouraged to apply online for the loan.

Small business owners may request an expedited disbursement of $10,000. If those funds are used in compliance with the above information, the $10,000 can be forgiven. Any amounts received over the $10,000 will not be forgiven and will act as a normal business loan.

If you have applied for the EIDL loan before information on the Paycheck Protection Program (PPP) was released, the small business may be eligible to refinance the EIDL loan to a PPP loan between February 15, 2020 and June 30, 2020. Click here for more information on the EIDL loan.

Paycheck Protection Program

The Paycheck Protection Program is designed to provide a direct incentive for small businesses to keep their workers on payroll by providing each small business a loan up to $10 million for payroll and certain other expenses.

If all employees are kept on payroll for eight weeks, SBA will forgive the portion of the loans used for payroll, rent, mortgage interest, and utilities. Up to 100 percent of the loan is forgivable if all requirements are met.

The maximum amount of the loan a small business can receive is 250% of monthly payroll (prior to COVID-19). Expenses that qualify for loan forgiveness include; payroll, rent, utilities and interest payments (with exceptions) on mortgage obligations. However, this loan cannot offset a current loan or be used to refinance other loans.

Businesses – including eligible non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors described in the Small Business Act – with 500 or fewer employees may apply.

Currently, loan forgiveness from the PPP is not going to be considered taxable income and the small business is still able to take the deductions. There may be further guidance on this over the next few weeks. Click here for more information on the PPP loan.