December 31 is the deadline to apply for an SBA Economic Injury Disaster Loan or up
to $15,000 in a Targeted Advance grant. The SBA is encouraging small businesses to apply by easing the EIDL guidelines so more funds can be distributed.
SBA Grants Do Not Have to be Paid Back
The EIDL Targeted Advance and Supplemental Advance grants provide sums up to $15,000 which don’t have to be paid. As a business, you must show a 30% decrease in revenue during an eight-week period beginning on March 2, 2020. Beyond this requirement, you can’t have more than 300 employees and you must use the funds for working capital and other operating expenses. Even though this small business grant doesn’t have large sums of money, it can help very small businesses address financial challenges. Need some new equipment? Want to upgrade your website? This money would really come in handy to give your business a lift.
To receive an advance, you must first apply for a COVID-19 EIDL. You do not need to accept the loan or be approved for the loan to receive an advance.
Get up to $2 Million in Loans
The SBA lifted the COVID EIDL cap from $500,000 to $2 million. Loan funds can be used for any normal operating expenses and working capital, including payroll, purchasing equipment, and paying off debt. That last change is huge – you can use the EIDL money to prepay (refinance) your existing commercial debt and make payments on federal business debt. If you have an existing loan, your rate is probably higher than the EIDL rates. You should consider an EIDL to refinance.
Here’s another great benefit of these loans: Borrowers can request increases up to their maximum eligible loan amount for up to two years after their loan origination date, or until the funds are exhausted, whichever is soonest.
The Rates are Lower than Commercial Loan Rates
The rates are great – 3.75% if you’re a for-profit company. Non-profits can apply as well and their rate is an even better rate at 2.75%. A conventional real estate-backed commercial bank loan rate will be anywhere between 5 to 10%. The loans have 30-year terms, compared to 5 years for bank loans, which greatly reduce your monthly payment. For example a $100,000 conventional loan at 5% interest with a 10-year amortization will cost you a monthly payment of nearly $1,100. Your monthly payment for an SBA EIDL loan would be just above $400. That’s a huge difference.
No Payments for Two Years
EIDL borrowers will not have to begin repayment until two years after loan origination. Your company can get the loan it needs, get fully through the pandemic without worrying about monthly payments. That’s a great deal.
Apply, You Have Nothing to Lose
The benefit of the EIDL program is you can apply even if you have received funds through the Paycheck Protection Program, the Restaurant Revitalization Fund, or the Shuttered Venue Operators Grant.
Whether it is a loan with low rates and a 30-year maturation date or grants you don’t have to pay back, it doesn’t hurt to apply. But time is running out, so do it right away.
When it comes to the Supplemental Targeted Advance applications, they will also be accepted until December 31. However, because of the legal requirements, the SBA says it may not be able to process some Supplemental Targeted Advance applications if they are submitted close to the December 31 deadline. After the December 31 deadline, the SBA cannot continue to process these applications.
Need business help? The experienced business attorneys at Fiffik Law Group have counseled thousands of business owners. We can bring that experience to bear for your business. Request a consult today or simply call us at 412.291.1014.