COVID-19 Federal Business Loans

The Basics of PPP and EIDL

With $349 billion already dispersed from March to early April, the Congressional CARES Act added $310 billion to help small businesses survive the COVID-19 pandemic. 

For business owners without an SBA loan there are two types of loans to keep on your radar: Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).

Payment Protection Program (PPP)

Administered by the Small Business Administration (SBA), this program provides a direct incentive for small businesses to keep their workers on payroll.

Eligibility

Provided on a first come/first serve basis, the loan principal and interest can be forgivable provided key conditions are met. 

• All employees must be kept on the payroll for eight weeks.
• Funds are to be used for payroll, rent, mortgage interest, or utilities.

PPP loans are based on prior tax filings and payroll records. Borrowers can request up to 2.5X their average monthly payroll.

Sole proprietors, independent contractors, and self-employed persons may also apply.

How to Apply

Businesses apply through their own banks or financial institutions, not directly to the SBA. Your bank will forward approved applications to the SBA for funding once reviewed and approved.

Loan Terms & Forgiveness

The entire principal and interest may be forgiven after 8 weeks provided borrowers can provide documentation they used over 75% of the loan for payroll.

Borrowers must apply for loan forgiveness with the same bank or financial institution who issued the loan.

If your loan is not forgiven, borrowers pay 1% interest and repay the loan over two years.

Economic Injury Disaster Loans (EIDL)

Congress recently provided the SBA an additional $60 billion dollars to fund EIDL loans and advances for small businesses, as these loans also ran out of funding. This loan is designed to be low interest and help businesses recover from any type of disaster, including COVID-19.

Eligibility

Also administered by the SBA, this loan provides businesses with up to a $10,000 advance while the overall application is pending ($1,000 per employee).

You must qualify as a small business based upon number of employees. Your approval is based on your company’s financials and ability to repay the loan.

The maximum loan is $2 million, based on economic injury suffered. There is no personal guarantee required on loans under $200K.

How to Apply

Applications are sent directly through the SBA website.

Loan Terms & Forgiveness

To qualify, borrowers must have fewer than 500 employees, with minimal exceptions.

The interest rate is 3.75% for businesses paid back over a maximum of 30 years and 2.75% for non-profit agencies.

Unlike the PPP loan, the funds may be used for any business expense, but the loan will not be forgiven. Businesses can defer repayments up to 6 months after issuance.