Dylan Telerski / 7 May 2020 / Business
The U.S. Small Business Administration is offering Economic Injury Disaster Loans (EIDL) worth up to $2 million. The goal is to support small businesses in overcoming temporary loss of revenue.
Keep in mind the loans, cash advances, and grants are only available as federal appropriations are made. Once the funding runs out, applications will no longer be accepted. Since multiple bills have passed already, the situation is extremely fluid, with more money likely to be doled out in the future.
Economic Injury Disaster Loans
What It Is: EIDLs provide working capital to meet necessary financial obligations during the disaster period.
How Much Can You Get?: You can take out up to $2 million in disaster assistance.
What Can You Use It For?: EIDLs can be used for essentially any business purpose – payroll, benefits, buying materials, rent, utility payments, and vendor payments. The funds should not be used for expansions, employee bonuses, long-term debt refinancing, or physical property repairs and renovations.
Do You Need To Repay It?: Yes, you will need to repay the EIDL, though you may also qualify to receive $10,000 in grant money while you wait for your loan, which you do not have to repay.
What Is The Term?: Terms last up to 30 years, depending on your ability to repay the loan.
What Is The Interest Rate?: Small businesses are subject to a 3.75% interest rate, while nonprofits receive a 2.75% interest rate.
Economic Injury Disaster Advance Grants
What It Is: Small businesses can receive a cash advance within days of a successful application.
How Much Can You Get?: You can receive up to $10,000 in emergency assistance.
What Can You Use It For?: The funds are meant to recover loss of revenue due to the economic pause.
Do You Need To Repay It?: No! This loan advance does not need to be repaid.
What Is the Term?: There is no term. It’s free money if you are approved!
What Is The Interest Rate?: There is no interest. The $10,000 is yours to keep.
Where to Apply: Apply for the Economic Injury Disaster advance here.
Unable to Get An SBA Disaster Relief Loan?
Getting an SBA disaster relief grant or loan is a great opportunity for small businesses, but it’s not the only option. There are also Paycheck Protection Program loans offering 2.5x monthly payroll expenses, capped at $10 million, that can be completely forgiven as long as employers use the money to keep their workers on the payroll for at least eight weeks. Yet, as you may expect, these funds, available through the U.S. Department of Treasury, are even more in short supply.
The good news is that you may be able to tap into your own savings short-term, thanks to a provision in the CARES Act that lets you borrow up to 100% of your 401k savings. Usually, you are only able to borrow 50%, so this is a good opportunity if you cannot access funds by any other means. You will be able to put the money back in, with no cap on the annual amount added, over the next five years.
The repayment term can be delayed for up to a year. If you can’t repay the loan, your outstanding balance will be taxed like a withdrawal, and you’ll need to pay a 10% early withdrawal penalty, so you want to make sure you don’t take out more than you can handle over a five-year period.
Contact Ubiquity if you have questions about a 401k loan, setting up a new 401k program, or keeping your retirement on-track during the coronavirus crisis.