The coronavirus is causing financial difficulties for businesses everywhere. As you are likely aware, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. The bill has allocated $350 billion to help small businesses struggling to cover payroll and operating expenses due to the COVID-19 pandemic.
The two main loan programs available through the CARES Act that require immediate action are the Economic Injury Disaster Loans (EIDL) and Paycheck Protection Loans (PPP). They both have received lots of press. But many management teams are unaware that you can apply for both loans; however, if you do so, $10,000 of the PPP will not be forgiven.
The Paycheck Protection Program provides small businesses with zero-fee 1% interest loans of up to $10 million to cover payroll and other operating expenses. Payments on principal and interest are deferred for a total of 6 months to a year after disbursement of the loan and may be forgiven if you have met the forgiveness criteria. Your small business is able to apply if you were harmed by COVID-19 between February 15, 2020 and June 30, 2020. One must apply for the PPP through an SBA approved lender.
Additionally, Economic Injury Disaster Loans create a new emergency grant of $10,000 for small businesses that apply. You can apply for the EIDL directly at the SBA website. However, the amount forgiven under a Paycheck Protection loan will be decreased by the $10,000 grant. You may also apply for EIDLs loans up to $2 million with interest rates of 3.75% for businesses and 2.75% for nonprofits, and principal and interest payments deferred up to 4 years at the SBA.
Your Business Will Benefit From Talking to an Exemplar Expert
Government programs can be daunting and complex, and it is essential your business understands the bill entirely before applying, since you may be required to repay some or even all of the loans given. The capital available to small businesses under the CARES Act program is limited, and will be distributed on a first-come-first-served basis. Most banks are prioritizing their existing customers, particularly customers with existing lending relationships. Understanding your capital requirements is critical during these times.
Consulting with a professional small business capital expert such as the team at Exemplar can help ensure your business will have access to the resources it needs to survive. The Exemplar team is here to guide your small business during the tough times with free Webinars featuring Q&A, access to focused strategic sessions with a capital team expert, and business continuity programs.