While much of the press – rightfully so – has been focused on the Paycheck Protection Loans created as part of the CARES Act, there are two other loans offered by the SBA that should be evaluated.
Your lender will have to give you guidance on how these three different loans work and coordinate with each other. In addition to the Paycheck Protection Loans, there are SBA Disaster Assistance Loans and Express Loans.
Disaster Assistance Loans come in the form of Economic Injury Disaster Loan (EIDL) programs or EIDL grants.
Entities eligible under EIDL loans are sole-proprietors, and other entities with under 500 employees. The loan amount is eventually determined by the SBA, but is capped at $2M. Interest rates are 3.75% for businesses and 2.75% for non-profit entities. Terms can be up to 30 years. What’s nice about these loans is that the SBA can approve them based solely on credit score and not require tax returns and other documentation. SBA also has waived the “credit elsewhere” clause and there are no personal guarantees for loans under $200,000. Applicants do need to be in business for one year.
Under this EIDL loan program, you will receive up to a $10,000 EIDL grant within 3 days of application. This is a grant and not required to be paid. If you are later approved for a loan under the Paycheck Protection Program, the grant will reduce the amount of the loan forgiveness.
Philadelphia, Pennsylvania, New Jersey, Florida, New York State, New York City, Los Angeles and many states and cities have also put into place grant or loan packages. We encourage you to visit any state and city website that you may be doing business in.
Continue to gather all your relevant financial information including your company formation documents, three years of financial statements, personal financial statements for owners over 20%, three years of tax returns – both business and personal — payroll records for 2019 and 2020, and a schedule of all debt. You may need these documents at different times during any of the loan processes you go through.
We are here to answer your questions. Please contact us via phone at 215-723-4881, email, or our contact page.