>> What can I qualify for?
Generally, there are 2 helpful federally backed loans (that largely can be forgiven, thereby operating more like a grant). The first is the EIDL to help you cover expenses in your business. The EIDL is issued directly from the SBA. The second is the PPP to help you cover payroll costs & keep your employees employed. The PPP is being administered through hundreds of banks and lending institutions throughout the nation. Generally, you cannot receive both the EIDL & PPP loans–however, if you applied for (and received) the EIDL before 4/3/20 you may indeed receive both (essentially the PPP will subtract the EIDL amount from the PPP eligible total).
>> More about the EIDL + how to apply…
- Your EIN.
- Official date of starting your business.
- Your social security # and DOB.
- Your Gross Revenue for 2019 if you have it (if you did not start operating ’til January 2020, you’ll look at revenue for 1/1/20 – 1/31/20).
- Your COGS for the same relevant-to-you dates (assuming your business uses COGS, which many do not).
After you receive an initial deposit into your banking account, my understanding is that you’ll receive correspondence from the SBA asking if you want to extend the loan to a larger amount. At that time, they may ask for more verifying data from your business. The interest on the extended portion will be up to 4% and a term of up to 30 years–but details will vary from case to case.
>> More info about the PPP loan…
The PPP loan was created to help small businesses keep their staff employed. (The assumption was the pandemic would create loss of revenue & new business which would force many employers to furlough or fire employees.) In conception, it’s a great offering as it will give your business 2.5x your businesses’ monthly payroll + benefits + provided healthcare costs.* Later, if you can show that this money paid for payroll, employer provided insurances, employer contributions to retirement plans, as well as state + local taxes on wages paid (plus that the wages paid by the company didn’t drop too much), the portions used toward paying payroll becomes 100% forgiven. If a portion of the loan is used to pay rent, utilities, or lease payments, the total of those expenses can be forgiven up to 25%. Personal guarantees have been waived. All that is required is a “good faith certification” that your business has been affected by the COVID-19 pandemic, your return, + payroll reports, and that the funds will be used according to the guidelines.The Treasury has confirmed that the interest rate of this loan will be 1% and the maturity will be 2 years. If you use this money for payroll only, this loan essentially turns into a grant and you won’t be paying interest anyways.
- Your EIN.
- Official date of starting your business.
- The average of your monthly payroll in 2019 (look at gross wages + provided healthcare costs + employer provided retirement contributions + any state and local taxes paid on wages). You’ll divide this number by 12. Do not include employer paid taxes, nor any payment to independent contractors in this calculation.
- Number of employees paid via payroll (newest guidelines suggest you look at the average of 2019 for this).
Then, the additional requirements differ a bit from lender to lender. To complete your application, you’ll likely need:
- Your latest business tax return.
- Payroll records for 2019 (I suggest starting with your 2019 940-form, though you may be asked for additional info).
- Payroll journal reports from February and March for each payroll you ran in 2020.
>> Where to apply for the PPP loan…
Initially it was very much recommended that small businesses apply for the PPP loan through their own bank or credit institution. This has worked out well for some, but not for others. Generally speaking, those banking with a very small bank have fared well in getting PPP loan applications through. However, small businesses who bank at larger institutions (such as Wells Fargo, Chase & Bank of America) have had more challenges — some of these larger banks are now not even accepting more PPP applications at this moment. If you bank at a larger institution who will not take an application from you, you will probably not have luck with a small bank (as most of those were only accepting applications from their own former clients to begin with). I suggest either riding it out (I’ll spare all the details, but behind the scenes, it sounds like Wells Fargo & maybe others will be able to accept & process more PPP loans as some federal rules are relaxed in how much they’re allowed to lend), or applying with either Fundera or Kabbage as they’re both accepting PPP applications online right now. You may also find a list by typing in your zip code on SBA’s website and looking to see if any local lenders are accepting PPP applications.
>> What if PPP funds run out before I get any?
>> But what about PPP if I operate as a Sole Prop? (or a 1-person business?)
>> Wrap-up
If you’re struggling financially, emotionally or spiritually during this unprecedented and strange time, please remember you’re not alone. Particularly when it comes to your business baby. Yes, there are a few businesses out there who are operating #BusinessAsUsual, but most are having to embrace fluidity, choose to pivot, or deeply re-evaluate. And that can be challenging. So be kind to yourself & your business. Embrace grace. Grace for yourself, for your business, and for others.
