By: Erin O’Shea, CFO of SEED SPOT
If you’re a small business, solopreneur or non-profit, I don’t have to tell you that you’ve been hard-hit by the economic crisis brought on by COVID-19. Maybe you’ve had to lay off workers as you watch your revenues slow to a trickle. Perhaps you’ve never had employees, but your contractor income has dried up. While these are stressful times, there is actually free and cheap money that’s been made available to you. All you have to do is apply!
The Economic Injury Disaster Loan is partially free and ready now
The Economic Injury Disaster Loan (EIDL) is part of the already-existing SBA program for victims of disasters like hurricanes. It allows small businesses and non-profits to obtain a grant for $10,000 and low-interest loans of up to $2 million. There’s no collateral required and the application process is fairly easy. To qualify, you only need to meet the SBA’s definition of “small” (which depends on your industry) and be in a state affected by the pandemic (i.e. everywhere). For more information or to apply online, visit this link.
The Paycheck Protection Program can be free but is still in the works
The Paycheck Protection Program (PPP) is part of the CARES legislation signed into law on March 27. It allows any business with fewer than 500 employees to borrow up to 2.5x of their pre-crisis average monthly payroll up to $10 million. The definition of “payroll” is broad and includes income to sole proprietors and independent contractors, so you’re still eligible even if you have no employees. The proceeds must be spent on rent, utilities, mortgage and other interest, and/or payroll. The loan is cheap (capped at 4%) and it becomes completely free if you maintain (or resume) the same number of employees as you had before the crisis.
There is some small print in the details of the PPP. For example, individuals paid over $100,000 annually are capped for the payroll calculation; if you’re seasonal, there’s an alternate calculation you can use; and there are a couple of ways you can calculate your number of employees. If you want to read the details, you can find the bill itself here.
Unlike the EIDL, the PPP must be applied for through a bank. At the time of this writing, banks are scrambling to put a process together, but you can expect to see them roll it out soon.
Some Good-to-Know Information
Neither loan requires collateral. There are no liens nor personal guarantees. If you borrow under EIDL (which you can do right now on SBA’s website), you can roll the balance of it into the PPP program. If you do apply for the EIDL, you’ll need to exercise a lot of patience—the system is super S L O W. Everyone and their uncle is applying for that loan right now, so SBA’s systems are at capacity.
Most importantly, this is free money, people. If you qualify, go get it.
And if you’d like some help navigating the process, SEED SPOT is here for you. Attend our free webinar on Wednesday, April 8th from 12:00-12:30pm PDT / 3:00-3:30pm EDT or contact us for information about one-on-one technical assistance.
This article was written by Erin O’Shea, CFO of SEED SPOT with 20 years of corporate and small business banking experience. These days, she is very popular with her dogs who think this working-from-home thing is awesome.
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