COVID-19 Financial Assistance Q & A
Are you having trouble figuring out which financial relief program in the federal CARES Act is right for your business? Here are some helpful FAQs to help navigate.
I have heard that if I already have an existing non-disaster SBA 7(a), 504 or microloan, I can get some relief, is this true?
Yes! The Small Business Debt Relief Program created by the CARES Act will provide immediate relief to small businesses with non-disaster SBA loans, in particular 7(a), 504, and microloans. Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law. You can also apply for one of these loans as a new borrower.
How do I know if I’m eligible for a 7(a), 504, or microloan?
In general, businesses must meet size standards, be based in the U.S., be able to repay, and have a sound business purpose. To check whether your business is considered small, you will need your business’s 6-digit North American Industry Classification System (NAICS) code and 3-year average annual revenue. Each program has different requirements.
What is a 7(a) loan and how do I apply?
7(a) loans are for borrowers who lack credit elsewhere and need access of up to $5 million in funding. The loan can be used to provide short-term or long-term working capital, to purchase an existing business, refinance current business debt, or purchase furniture, fixtures and supplies. In the program, banks share a portion of the risk of the loan with SBA. There are many different types of 7(a) loans, you can visit this site to find the one that’s best for you. You apply for a 7(a) loan with a bank or a mission-based lender. SBA has a free referral service tool called Lender Match to help find a lender near you.
What is a microloan and how do I apply?
The Microloan Program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers to start up and expand. The average microloan is about $13,000. These loans are delivered through mission-based lenders who are also able to provide business counseling. SBA has a free referral service tool called Lender Match to help find a microlender near you.
What is this $10,000 grant that is part of the SBA Economic Injury Disaster Loan (EIDL)?
If you apply for an EIDL (Economic Injury Disaster Loan), it includes a grant to provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an EIDL. To access the advance, you first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
You can apply for an EIDL, accept the $10,000 grant and then turn down the remainder of the EIDL loan. To be eligible for an EIDL grant, the business must have been in operation since January 31, 2020, when the public health crisis was announced.
Can I apply for both an EIDL Loan and the PPP (Paycheck Protection Program) and get both?
Yes, the SBA has clarified that if you take out an EIDL loan for working capital expenses only, you can then take out a PPP to pay for payroll expenses. Original guidance from the SBA indicated that you could not use both loans. It is possible that the SBA will deduct the $10,000 EIDL grant from your PPP loan, depending on what expenses, other than payroll, you plan to use the PPP loan for.
My bank is a SBA approved lender, but it is telling me that it does not want to service my Paycheck Protection Program (PPP) loan, but it is processing a loan for the restaurant down the street. Is that possible?
At this time, some lending institutions are not fully on board with how to process PPP loans, and therefore may have set standards that each applicant needs to meet, such as payback risk based on loan forgiveness from the SBA. As the SBA and US Treasury Department further clarify loan guarantees and application requirements, hopefully more lending institutions will be able to process additional loans. If your lending institution is not accepting your loan application, we suggest that you contact other institutions in your area.