Can your business use an infusion of cash caused by the COVID-19 pandemic?

So, if you haven’t heard the PPP (forgivable loans) from the SBA ended August 8. Although, it may come back in a revised form. We will keep our fingers crossed.

But you can still obtain a low-interest Emergency Income Disaster Loan (EIDL) of up to $150,000 from the Small Business Administration (SBA). This is not be considered income. (Yay!)

Here is what you need to know to qualify and ow the loan should be spent.

Do You Qualify for an EIDL?

Here is what your company needs to qualify:

Your business has fewer than 500 employees
Have suffered “substantial economic injury” due to the COVID-19 pandemic
- “Economic injury” is defined as unable to pay your normal business operating expenses and other bills, or to sell or produce your goods or services because of the pandemic.

You can still apply for an EIDL even if you already received a PPP loan. However, you may not use the EIDL to pay the same payroll costs or other expenses you pay with a PPP loan.

In other words no double dipping!

How Much Can You Borrow?

The SBA is currently capping EIDLs at $150,000.
The amount received is intended to cover six months of your business operational expenses.
For most small businesses, the loan amount is based on gross revenues minus cost of goods sold during the period from February 1, 2019, through January 31, 2020, divided by two.

What Are the Loan Terms?

These are 30-year loans at a 3.75 percent interest rate.
You don’t have to make any payments until one year after you receive the loan (interest continues to accrue during the one-year delay).
There is no prepayment penalty.

How Do You Apply?

You apply for an EIDL with the SBA,
The loan is funded directly from the U.S. Treasury.
You can apply online, and the SBA has created a streamlined application.
- Use this link to get to the application: https://covid19relief.sba.gov/#/

Do You Need to Have Collateral or Make Guarantees?

The SBA does not require a personal guarantee for an EIDL of less than $200,000.
Collateral is required only if the loan is over $25,000.

For loans over $25,000, the SBA obtains a security interest in all tangible and intangible property your business owns
- See our article 7 things to know about the EIDL

How You Can Use the Money

The money is supposed to be used to help you carry on your business until life gets back to normal, whenever that may be.

Use the money to pay normal operating expenses, such as employee salaries and benefits, rent, utilities, and fixed debt payments.
You can continue to take your owner’s draw for work you actually perform for the business.

How You Can’t Use the Money

Not to be used to replace lost sales, fund business expansion, start a new business, or refinance long-term debt.
Nor can you use them to pay yourself dividends or bonuses.

If there are more updates, which there probably will be, we will keep you posted.

For more information, this article and many more to help your business grow are on our website cdprofessionalservices.com/blog