I’m sure by now many have heard of the EIDL (Economic Injury Disaster Loan) and PPP (Paycheck Protection Program). These two programs will offer cash for small businesses. 10k for the EIDL and the 2.5x your monthly payroll for PPP. They are 100% forgivable loans for all US-based small businesses that you can apply for during the pandemic. Assuming you use the loans as directed, which is pretty broad according to the Small Business Association, these are essentially grants.
Now, for the disclaimer. I’m not an accountant, a banker, a lawyer or any of that. I applied for this for our company and am passing on my understanding of the situation and my sources. Honestly this whole thing is a massive disaster and it’s impossible to know what‘s right. Even the experts are just taking their best guesses because the official sources are giving out conflicting information.
Who’s Eligible (EIDL)
If you’re based in the USA, your business was started before Feb 15th, and you’re sufficiently ”small” (less than 500 employees) you are probably eligible. There aren‘t any credit checks or personal guarantees on the ADVANCE (the 10k). If you run a business of ANY kind, I would apply. This means 1 person startups, gig workers, etc. It suggests 2 hours to fill out, but it only took us 30 minutes. Make sure you check the box in the application to make it known that you want to receive the 10k advance,
By submitting the application, you could potentially get approved for a loan for up to 10 million dollars if you need it. That money would come in a couple weeks, provided you got your application approved and you wanted to accept the money.
Here’s the best part though. You will get the 10k advance “in 3 days” (spoiler alert: we didn’t but we will discuss that further down.). You get to keep the advance regardless of whether or not your application is accepted.
You can get started on this process here.
Who’s Eligible (PPP)
As with the EIDL, if you’re based in the USA, your business was started before Feb 15th, and you’re sufficiently ”small” (less than 500 employees) you are probably eligible. If you even have a passing thought about applying, I would at least look at the application. The whole loan is forgivable as long as you don’t lay off or reduce the salary of your employees.
It seems to be very open-ended on what “paying payroll” means. For example, you have 0 employees, are a sole proprietorship or a single member LLC, and you take a salary for yourself. Or you simply draw money from the company. When in doubt, I would say attempt to apply. Worst case scenario is you applied in good faith, but you now have to pay the money back after 6 months with 1% of interest accruing.
How to Apply (PPP)
Assuming you have a bank you work with for your business matters, contact them about the application. Otherwise, try a local community bank. The big banks have been flooded with paperwork and may or may not be able to take your request.
I am also still working on getting this part done so I have no advice yet. I’ll update the post once I get further in the process.
Should You Apply
Overwhelmingly yes you should apply as soon as possible. The whole thing is a big confusing mess right now but there is no time to wait. Other people are applying and money will be given out on a first-come-first-serve basis.
It is ordinarily very hard to impossible to get a small business loan without a personal guarantee. This is due to the fact that if a bank loaned money directly to startups, which statistically fail 25% of the time in just the first year, they would be out of a ton of money. The owners would just dissolve the company and the bank would be out of luck. What we have now, seems to me at least, to be a very good deal for business owners.
Here’s what I would (and did) do. Fill out the application to the best of your ability NOW. Get the money in your bank account and then decide what to do with it. They won’t ask anything of you for the next 6 months and you have the option to pay it back if you want.
We may get further clarification on the terms of the money later. Wait out the virus and don‘t be afraid to use it if your business needs it.
Where We’re At
I applied for the EIDL last weekend. As we all know they claimed we would receive the funds in 3 days. We still haven’t received any. I have been checking emails daily but I‘m not getting my hopes up. It doesn’t seem like anyone anywhere I ‘ve read online has received any money yet, including the people who applied the first day it was available. So, I expect it will at least another week.
Notes
I will continue to update this as I learn more.
- If you apply for both types of loans, do not use them both to cover the same expense. If you use the PPP loan for payroll, you’re not allowed to spend any of the EIDL on that.
- 5/28. The SBA seems to be arbitrarily changing the terms of the loans. As such, not everything I wrote above may still apply. If you take the money, be careful of how you spend it.
Sources
- [1] https://www.investopedia.com/how-to-apply-for-an-economic-injury-disaster-loan-eidl-and-loan-advance-4802134
- [2] https://www.californialegalresearch.org/paycheck-protection-program-information/
- [3] https://www.reddit.com/r/Entrepreneur/comments/fvsrau/guide_to_paycheck_protection_program_apply_as/
- [4] https://www.reddit.com/r/Entrepreneur/comments/fx0r48/banker_here_been_working_day_and_night_on_sba_ppp/
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Update 4/15
It seems like some rumors have been confirmed. I‘ll break stuff down by category.
Applying for PPP
I ended up not applying for the PPP program. From my calculations the potential money for us would be a couple hundred at best. Not worth the trouble of filling out the application.
EIDL Update 4/14
I recieved an email from the SBA about the EIDL grant yesterday. Among other things, it says this:
To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.
Thats a huge difference from what was reported by the media earlier. I know a lot of people (myself included), expected a flat 10k per business. Personally this seems to screw over the small business who need the help the most. Individuals should be recieving 1200 (a person) + 500 (per dependent child). That is nothing for someone who has lost their job due to the virus. Now imagine you’re supposed to keep your whole business afloat with that? So much small businesses, the so called backbone of America.
Rumor has it that applications between March 31st and April 4th are being processed currently. So I expect to lay eyes on 1k this week or early next week. Another rumor is that they do a credit pull a day or two before hand. This should be personal credit for most small businesses. If you have credit monitoring, you can supposedly use the hard pull as an indication that you‘ll be recieving funding soon.
Lastly, for some confirmed information. The actual amount of EIDL loan (not the advance) you can qualify for is being drastically reduced. From 2 million down to 25,000.
EIDL Update 5/28
It’s been a wild ride with this EIDL situation. I’ve been frustrated with the process and haven’t written about it because of that. Here’s what happened:
I’ve realized weeks ago that I probably didn’t fill out our profits/losses quite right. I was told there was nothing that could be done with that except for me to wait until I get the loan denial email and I would then have the option to contest it. However that should have had no impact on my eligibility to get the advance.
I figured this situation would not be resolved unless I lit a fire under someone’s ass 😅
I had been calling the SBA twice a week for the past 4 weeks or so. Just in case someone else is in my situation, here’s the phone number: 877-641-8202. Have your application number, your company type, where it was registered (state+county), and the last 4 digits of your ssn ready. I was finally able to get them to send me a denial email Monday the 24th. Some wording stood out to me:
Your economic injury is less than the amount you received from the EIDL Advance. As a result, we are unable to substantiate any additional eligibility at this time.
This seemed to imply that I had received the advance already which was not the case. I figured I needed to continue calling.
The thing with these support representatives is, they are really a mixed bag of who knows what they’re talking about and who can help you.
- I was told several times that receiving the advance was dependent on me being approved for the loan as well. I’ve personally seen several cases of the opposite.
- They say the rules have changed. ...I applied nearly 2 months ago. They need to honor the terms I applied under.
Finally I got lucky. I managed to get a representative who actually helped me. Here’s what I was told:
- There are two separate systems here. The Advance is automated. Then there is the valuation for a potential loan offer. I got denied for the potential loan. The advance is in fact a separate issue
- He looked at my account and was able to see that the automated system failed to make a deposit of my advance. My bank and routing number are correct. We were able to figure out it is likely my bank that is the issue. I have a business bank account with Mercury. They’re very very new and a subsidiary of Evolve Bank & Trust.
- He suggested I send an email to disastercustomerservice@sba.gov . The subject should be the Application number. The body should include the application number, business number, tax payer ID number. I should write that I realize I have been denied for a loan but I am requesting the Advance, and describe my situation.
- There is no guarantee that I’ll get anything but it’s worth a shot. At least I have some direction
Applying for Unemployment
Our business will be fine long term (I hope) but we are shut down at the moment. The CARES act expanded unemployment insurance with new rules and new money. My state just opened the unemployment application to self employed individuals two days ago I believe. I am currently working on the application and will likely write a whole new post about that.
Edit: Post available here
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