How to Get a PPP or EIDL Coronavirus Relief Loan Before Funds Run Out (Again!)
By Gerri Detweiler
If you haven’t applied yet for a COVID relief loan for your landscaping business, you may be in luck. On April 24, 2020, additional funding for Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL) was approved.
These loan programs can provide valuable assistance for businesses impacted by coronavirus. The second round of funding is expected to go quickly so you’ll need to act fast.
Here are important things you need to understand if you are considering one or both of these loans:
Part of the SBA Disaster Loan program, EIDLs are designed to offer businesses impacted by coronavirus loans for up to $2 million at 3.75% with a repayment period of up to 30 years. These loans aren’t meant to replace lost sales, but instead to help businesses cover working capital needs while they recover from the disaster.
When applying for EIDL, a business owner may request the EIDL Emergency Grant, which is essentially an advance on the loan of up to $10,000 ($1,000 per employee) which does not have to be repaid.
This program offers loans for up to 2.5 times average monthly payroll to be used primarily for payroll. The maximum loan amount is $10 million. If the loan proceeds are used properly, the business owner may apply for forgiveness. Acceptable uses when it comes to forgiveness include payroll (75% or more of loan proceeds) while up to 25% may be used for rent, mortgage interest or utilities. If approved, the entire balance may be forgiven.
Tip: The Nav CARES Act SBA loan calculatorcan help you calculate how much you may qualify for, including the calculation for seasonal businesses.
For PPP, it’s important to understand that you don’t include contractors you pay on a 1099 basis in your payroll calculations. Instead they are supposed to apply on their own. If you file Form 1040 Schedule C, you’ll use the net profit on Line 31 for 2019 as your annual revenue. (Your maximum loan amount is then 2.5 times that. There is no seasonal calculation for those who file Schedule C.)
Can I get both EIDL and PPP?
You can apply for both of these programs but you can’t use funds from each one for the same purpose. In other words, you can’t use proceeds of EIDL for payroll, then use PPP funds for the same purpose.
However these programs may be complimentary in that you may use PPP funds for payroll and EIDL for other working capital needs such as paying accounts payable, fixed debts or other bills that could have been paid had the COVID-19 disaster not occurred.
Are there personal guarantees?
For EIDL a personal guarantee is only required for loans above $200,000. Collateral may be required for loans of more than $25,000.
For PPP, there is no personal guarantee or collateral required.
Do I need good credit?
Not for PPP. Unlike most SBA loans there is no personal credit check required. For EIDL, however, acceptable credit is required. A personal credit check will be required for all owners with 20% or more ownership interest. A business credit checkthrough D&B will generally be required for loan amounts above $200,000, except for sole proprietors. (Note: You can check your business and personal credit reports for free through Nav.)
How quickly can I get funding?
The EIDL grant was designed to get money very quickly into the hands of small business owners, and the legislation authorizing it specified that business owners would get the advance within three days of application. However, the SBA has been overwhelmed with applications and it is taking longer than expected. As of April 20, 2020, the SBA reportsthat 755,476 advances have been processed and 26,919 loans have been made. It’s unknown how many are still pending, but it appears that funding may take several weeks or more. The SBA will process applications on a first-come, first-served basis, so it’s important to get your application in as quickly as possible once the SBA opens the application portal again.
For PPP, funding should come more quickly for those who are able to get approved. It’s important to understand that the first step is filling out an application with an SBA approved lender or agent. The lender must submit the completed application to the SBA for an approval number. (This “reserves” the funds for that loan.) Only after the SBA approval number is received can the lender finalize the loan and disburse funds. Currently the SBA requires that lenders disburse these loans within ten days of approval through the SBA.
Where do I get these loans?
EIDLs are only available through the SBA and you apply at the Economic Injury Disaster Loan portal which has been closed until more funding is approved by Congress. Bookmark the site and be ready to apply when funds become available again.
PPP loans are available through a variety of lenders and agents, including banks and fintech lenders. (You can also apply for PPP at Nav, where I work. We match borrowers to PPP lenders.) Many borrowers are filling out applications with multiple lenders to help improve the likelihood of getting funded. Keep in mind, you can only accept a single PPP loan for your business.
Gerri Detweiler has been guiding individuals through the confusing world of finance and credit for 20+ years. She is the author or coauthor of five books, including her most recent, Finance Your Own Business: Get on the Financing Fast Track. Today, Detweiler serves as the Education Director for Nav, an online platform that matches small business owners to their best financing options and gives free access to personal and business credit scores.