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    SBA’s Economic Injury Disaster Loan Basics For COVID-19

    SBA Economic Injury Disaster LoansThe Friends of Lafitte Greenway and the Greater Mid-City Business Association sponsored a webinar with the U.S. Small Business Administration (SBA) on April 1, 2020.

    Michael Ricks, District Director SBA, Louisiana and Friends of Lafitte Greenway Board Member presented the latest updates as of 11:00 AM on April 1, 2020.

    WHAT YOU NEED TO KNOW: Nearly all self-employed individuals and small businesses are eligible for partially forgivable loans under the Economic Injury Disaster Loan Program (EIDL) and the Paycheck Protection Program (PPP). We have included a summary of the details on each program below.

    Economic Injury Disaster Loan Program (EIDL)

    The SBA’s Economic Injury Disaster Loan Program is a loan program that is available to assist impacted independent contractors, 1099 employees, self-employed persons, and Small Businesses with less than 500 employees. In certain circumstances, businesses with more than 500 employees in certain industries may also be eligible.COVID-19 Disaster Loan Basics

    Upon acceptance of your application, most businesses will be eligible to receive a $10,000 forgivable advance to assist with short term payroll and operating expenses. This advance is intended to provide quick access to funds while your loan is being processed over the next 30 – 45 days.

    The interest rate for any portion of the loan that is not forgiven will be 3.75%. Non-profit organizations are eligible for an interest rate of 2.75%. These loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the business not been impacted by COVID-19. Loans will not be denied based upon a lack of collateral.

    Nearly all independent contractors, self employed individuals, and small businesses (under 500 employees) in the United States are eligible.

    Businesses that are specifically ineligible and would NOT qualify are agricultural enterprises, religious organizations, charitable organizations, gambling concerns (with more than 1/3 of gross revenue from gambling), and all casinos and racetracks. Please note there may be other assistance programs for which these businesses will be eligible.

    Applications for the Economic Injury Disaster Loan Program (EIDL) will NOT be accepted by local banks. All applications for the EIDL must be submitted online at covid19relief.sba.gov. Even if you are not yet certain if your business will need assistance, it is recommended that you apply now. You will NOT be able to apply to recover losses after the fact.

    There is no cost to apply and you are not obligated to take the loan if you are approved.

    NOTE: If you had previously applied using a different version of the EIDL application, your application will still be processed. However, you will not be considered for the $10,000 forgivable advance. In order to be considered for the $10,000 forgivable advance, you must re-submit an application using the updated version of the application at covid19relief.sba.gov. Even if you re-submit the new version of the application, your original application will continue to be processed in the same order it was received.

    Applications are only being accepted online. There will be no Disaster Assistance Centers or local drop off locations. Anyone needing assistance completing the application may contact the Louisiana Small Business Development at lsbdc.gnor@lsbdc.org.

    If an application is denied, the applicant will have up to 6 months to provide new information and submit a written request for reconsideration.

    One the application is accepted, there will be additional forms and documentation that you will be required to submit. The additional information may be submitted online or by fax. After submitting your application, you will receive an email with a link to check the status of your application and email notifications for additional documentation requested.

    Find more information on the SBA’s Economic Injury Disaster Loans at: SBA.gov/Disaster.

    Paycheck Protection Program (PPP)

    The Paycheck Protection Program (PPP) was announced on March 31, 2020. This program offers forgivable loans to impacted independent contractors, 1099 employees, self-employed persons, and Small Businesses to cover up to 2.5 months of payroll costs, interest on mortgages, rent, and utilities.

    Paycheck Protection Program Applications must be submitted through your bank.

    Small businesses and sole proprietors can apply beginning April 3, 2020. Independent contractors and self-employed individuals must wait until April 10, 2020 to apply. We encourage you to apply as soon as possible because there is a cap on funding available for this program.

    The application for the Paycheck Protection Program is currently available to review here. Nearly all banks will be accepting applications for the Paycheck Protection Program. These loans will be directly funded by the local banks and guaranteed by the federal government to allow expedited access to funding.

    Paycheck Protection Program loan amounts will be limited to 2.5 times your monthly payroll, rent, mortgage interest, and utility expenses. These loans have a an interest rate of .5% and 2 year term.

    If you maintain your workforce, the SBA will forgive the portion of the Paycheck Protection Program loan that is used to cover the first 8 weeks of payroll and certain expenses (i.e., rent, mortgage interest or utilities.

    NOTE: If your business also receives a $10,000 forgivable advance under the EIDL (see section above), the forgivable portion of the Paycheck Protection Program loan may be reduced by up to $10,000.

    Independent contractors, 1099 employees, self-employed persons, and Small Businesses with less than 500 employees are all eligible. Businesses with more than 500 employees in certain industries may also be eligible.

    Paycheck Protection Program loan payments will be deferred for up to 6 months after loan funding.

    Find more information on the SBA’s Paycheck Protection Loans at: sba.gov/funding-programs/loans/paycheck-protection-program-ppp

    Which Program Is Right For You?

    Not sure which program to apply for… Our recommendation is to apply for both.

    The EIDL program does not obligate you to take the loan if approved. However, you may end up needing the additional funds if COVID-19 and the related shutdowns persist into the Summer. The interest rate is higher at 3.75% vs only .5% for the Paycheck Protection Program. However, the EIDL program allows up to 30 years to re-pay any portion of the loan that is not forgiven, vs only 2 years with the Paycheck Protection Program.

    Other than the $10,000 EIDL advance, the Paycheck Protection Program will likely be the quickest route to assistance funds. Since the local banks will be processing the Paycheck Protection Program applications, they will be able to process the applications more quickly. So, the Paycheck Protection Program may be a good option for your business, if you qualify for the loan to be forgiven or plan to pay it off within 2 years.

    Interested in watching a recording of the SBA webinar? Click here

    How Can We Help?

    We would love to hear from you and how your business is doing. Let us know how we can help you through this challenging time. Simply give us a call or send us a message below.

    Keep updated with news and updates for small business owners by following our Small Business Blog.

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