By Adam M. Stumpf
If your business has taken a big economic hit because of the Covid 19 pandemic, you may be eligible for an SBA Economic Injury Disaster Loan (EIDL) to put much needed operating cash in your coffers. The window is closing on this opportunity (deadline to apply for funds is December 31, 2021) so if you qualify, now is the time to apply.
Who can benefit? My small business clients working in sectors including manufacturing, hospitality, printing, retail and entertainment qualify for this loan, as well as agricultural cooperatives and most nonprofit organizations. These funds can provide a critical lifeline, and with payments stretched over 30 years at interest rates of less than 4 percent, the terms and exposures is manageable.
How much can you get? With all of the qualifying paperwork in order, proving substantial economic impact, companies can qualify for an EIDL loan of up to $25,000 unsecured and up $500,000 secured, at 3.75 percent interest rates for businesses, 2.75 percent for non-profits fixed over 30 years. The size of the loan is determined by your average annual receipts or number of employees. Unlike PPP funding, this is not forgivable. Of course, taking on a six-figure debt isn’t something to ever be taken lightly.
What if I already got an EIDL loan? For loans of less than $500,000 approved prior to April 7, 2021, you can now apply for an increase. So if you got $150,000 when the program started, now’s the time to apply for up to $350,000.
Grant or loan? The EIDL is a loan. You may have received an advance in connection with the EIDL. The advance is a grant and does not have to be repaid.
Can you use $15,000 that doesn’t have to be repaid? Who couldn’t? Although an EIDL advance up to $15,000 comes off of the top of whatever standard EIDL loan you apply for, most businesses with losses of 30 percent or more have plenty of ways to spend that money. To receive an advance, you first have to apply for a COVID-19 Economic Injury Disaster Loan – you are not required to take any funds. The SBA will then send an email invite to apply if your business is located in a low-income area – which the greater New Orleans area qualifies as.
Not a quick fix. If you need funds tomorrow, be aware that the SBA is backlogged with existing applications but is promising to work through them by the end of August, early September 2021. The funding is there, you just might have to wait for it.
More good news – up your game: The application process gives you the opportunity to formalize your small business, finally get paperwork like operating agreements and articles of organization in place. If you treat your company like a real business, good things will flow. And when the next opportunity for funding or growth comes around, you’ll be ready.
The Takeaway: Apply now to qualify for an EIDL loan of up to $500,000 at 3.75% interest over 30 years, or an EIDL advance grant for up to $15,000 that doesn’t need to be repaid. The cutoff date is December 31, 2021.
Adam M. Stumpf is a business attorney with Chehardy Sherman Williams handling business transactional matters, including sale and mergers of businesses, contract drafting and review, licenses, zoning, and employee issues and disputes. In addition to his transactional practice, Mr. Stumpf handles commercial collections and business disputes prior to and including litigation.