In 2020, the Paycheck Protection Program (PPP) was launched to help small businesses afflicted by the COVID-19 epidemic financially. In order to retain people on the payroll and pay for other permissible expenses, the program provides firms with forgiven debts. The PPP has been extended through 2021 and is still taking applications from qualified businesses.
Applications for PPP are now being accepted by the Small Business Administration (SBA) through participating lenders. Banks, credit unions, and other financial organizations that are permitted to offer PPP loans fall under this category. Additionally, the SBA has increased the number of lenders on its roster, making it simpler for small firms to obtain PPP loans.
Businesses must meet specific qualifying standards, such as having 500 or less employees and being operational before February 15, 2020, in order to apply for a PPP loan. The maximum loan amount is $2 million and is based on the business’s average monthly payroll expenditures. The loan amount is up to 2.5 times the monthly payroll amount. Businesses must use at least 60% of the loan funds for payroll costs in order to receive complete debt forgiveness.
Economic Injury Disaster Loans (EIDL) and PPP loans made by the SBA are intended to be repaid. However, if the company complies with certain requirements, such as using the loan funds for approved expenses and maintaining personnel levels, the PPP loans can be completely forgiven. There are forgiveness alternatives for EIDL loans as well, but they are not as generous as PPP loans.
A firm will be obliged to repay their PPP loan with interest if they do not meet the requirements for debt forgiveness. PPP loans have a 1% interest rate and a 5-year repayment period. With a payback duration of up to 30 years, EIDL loans have a higher interest rate of 3.75% for small firms and 2.75% for non-profits.
Businesses should ensure they have all the required paperwork and information ready before applying for an SBA loan to speed up the process. Financial records, tax returns, and payroll records fall under this category. Additionally, they want to pick a lender with SBA loan expertise who is a member of the program and participates in it.
Businesses should also be ready to respond to any inquiries or offer any additional data that the SBA or lender may need. Being organized and responsive can both hasten the loan application process and improve approval rates. How long does it take to get funds from the EIDL?
Depending on the number of applications the SBA is handling and the complexity of the application, the time it takes to obtain EIDL money can change. Businesses can typically anticipate receiving their EIDL cash two to three weeks after approval. The funds might, however, take longer in specific circumstances.
Businesses will only be eligible for one EIDL loan per catastrophe designation starting in 2021. However, the SBA just unveiled the Targeted EIDL Advance program, which gives businesses in low-income areas extra financing after they’ve already secured an EIDL loan. The Targeted EIDL Advance program allows for the additional funding of up to $10,000 for eligible firms.