Part 3 of a series. Covers the $10,000 from the EIDL that does not have to be repaid.
The Coronavirus Preparedness and Response Supplemental Appropriations Act included SBA loans for small businesses. The first $10,000 of the loan does not have to be repaid.
Please note: before taking action based on this information, please do your own research, including speaking with your CPA, financial advisor or planner, employer, loan servicer, state unemployment office, and heck, maybe even a priest or shaman. My goal is to share my best understanding and to be of service. I hope you find this helpful.
On March 6th, 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act became law. This law included funding for telehealth for Medicare, for vaccine development, for public health funding, and for medical supplies and preparedness. Additionally, extra funding is allocated for departments and agencies. This law included disaster loans to be provided to small businesses through the SBA. Those Economic Injury Disaster Loans (EIDL) are discussed in this post.
As a general rule, I believe government programs and loans are best avoided. However, I also believe we are not going to quickly return to normal in the next few days or weeks, and it is hard to know now what in the future we will wish we had done now. With that in mind, I decided to apply for the EIDL loan.
My understanding is that if you are in a state that has declared a disaster, you can apply for the EIDL loan from the US Small Business Administration (SBA). Disaster declarations can be found here.
You will need to disclose your gross receipts for the period from February 1, 2019 to January 31, 2020 plus your cost of goods sold (if applicable). The application only takes a few minutes to complete. The loan would be for up to 50% of your gross receipts.
The most interesting part of this program, though, is the $10,000 advance. This initial money supposedly will be sent directly to your business's account (you will need to provide the routing and transit numbers), and it does not have to be repaid. For more details on the advance, check out the information on the SBA site here. It is my understanding that accepting the advance does not require you to take out a loan.
I have applied for this program for our IT consulting company. If you would like to apply, the application is here.
After I applied, the confirmation screen said I should hear from them via email in about a week to let me know they are processing my application. I imagine they are completely overwhelmed, but we will see how it goes. I'll keep you all posted.
In addition to this program, there is also another SBA program, the Paycheck Protection Program, that is intended to help employers keep employees on the payroll. A portion of that loan can be forgiven. As I am able to assemble information, I will post more on that as well.
Journal questions:
If you are a small business owner, how has your company been affected? How do you think this situation will continue to unfold? What steps could you take now to position yourself for the future?
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