SBA Loans for Dummies - Marketing Bonfire
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Marketing Bonfire Waco - SBA Loans for Dummies

SBA Loans for Dummies

Recently the federal government has taken action to ease the burden felt by small businesses and entrepreneurs across the country who are experiencing the repercussions of the closure of “nonessential” companies.

I’m discovering that many entrepreneurs don’t know about these relief options or, as I had done when I first heard about the CARES Act, they have assumed they don’t qualify for assistance.

I’m here to tell you, most small businesses including local sole proprietorships, independent contractors, gig-economy workers, and self-employed individuals are eligible for these programs.

Below is a simplified breakdown of the EIDL and the PPP which was graciously provided by CPA, CGMA, CFE & Partner Lindsey Skinner of Pattillo, Brown & Hill, LLP. (www.pbhcpa.com)

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EIDL (Economic Injury Disaster Loan)

This loan can be used for payroll costs, fixed debt and accounts payable and can be up to $2 million.  However, this is an unforgivable loan and is to be repaid up to 30 years with a 3.75% interest rate for small businesses and 2.75% for non-profits.

  • These loans are considered “loss of revenue” loans and may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact.

 

  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower's ability to repay.

 

  • Credit will be reviewed, and repayment ability is based on “pre-disaster conditions.”

 

  • Disaster loan cannot be used to refinance existing debt.

 

  • The expected turn-around time for the first $25,000 of funding is five days. Any additional funds are currently estimated to take 18-24 additional days.

 

  • EIDLs over $25,000 require collateral (and that collateral will be required to be insured within 12 months). SBA takes real estate as collateral when its available. SBA will not decline a loan for lack of collateral but requires borrower to pledge what is available.

 

  • Applicants can have an existing SBA Disaster Loan and still qualify for an EIDL for this disaster, but the loans cannot be consolidated.

***You are also able to receive up to a $10,000 advance on economic relief if you are experiencing difficulties due to the pandemic.

The SBA has a very simplified website portal that allows you to answer a few questions and to get into the system for this advance.  To file for this type of loan, visit: https://covid19relief.sba.gov/#/

To see if you qualify for the EIDL and a full step-by-step guide, click here.

This loan can be used for payroll costs, fixed debt and accounts payable and can be up to $2 million.  However, this is an unforgivable loan and is to be repaid up to 30 years with a 3.75% interest rate for small businesses and 2.75% for non-profits.

  • These loans are considered “loss of revenue” loans and may be used to pay fixed debts, payroll, accounts payable and other bills that can't be paid because of the disaster's impact.

 

  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower's ability to repay.

 

  • Credit will be reviewed, and repayment ability is based on “pre-disaster conditions.”

 

  • Disaster loan cannot be used to refinance existing debt.

 

  • The expected turn-around time for the first $25,000 of funding is five days. Any additional funds are currently estimated to take 18-24 additional days.

 

  • EIDLs over $25,000 require collateral (and that collateral will be required to be insured within 12 months). SBA takes real estate as collateral when its available. SBA will not decline a loan for lack of collateral but requires borrower to pledge what is available.

 

  • Applicants can have an existing SBA Disaster Loan and still qualify for an EIDL for this disaster, but the loans cannot be consolidated.

***You are also able to receive up to a $10,000 advance on economic relief if you are experiencing difficulties due to the pandemic.

The SBA has a very simplified website portal that allows you to answer a few questions and to get into the system for this advance.  To file for this type of loan, visit: https://covid19relief.sba.gov/#/

To see if you qualify for the EIDL and a full step-by-step guide, click here.

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PPP (Paycheck Protection Program)

This is a new loan program intended to help small businesses that have partially or fully shut down because of the COVID-19 pandemic. The PPP makes low-interest loans available to small businesses to help keep them afloat during the next few months. If a small business complies with certain conditions, the loan will be partially or fully forgiven.

This loan can be used for payroll, business rent, business utilities and mortgage interest.  However, only 25% of the total loan can be used towards expenses other than payroll.  The loan is based on 2.5 times your monthly average payroll (even if you are a sole proprietor who doesn’t take a traditional paycheck).

The amount that is not forgiven will be repaid over 24 months at 1% interest and the first payment is deferred for at least 6 months.

The PPP application form can be downloaded at: https://www.sba.gov/document/sba-form--paycheck-protection-program-borrower-application-form

For more assistance on these programs, I advise reaching out to your accountant. They should be able to assist you with handling the process should you need help.

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Want to hear more from Marketing Bonfire? Check out Why It’s a Terrible Idea to Stop Your Social Marketing During a Crisis

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Heather Dudley - Marketing Bonfire Social Media Management Waco, Texas

Heather Dudley of Marketing Bonfire has been assisting small to mid-size businesses handle the planning and execution of the various strategies that most effectively find your audience, engage them and ultimately turning them into valuable customers. Get the voice of your brand and your key message out to the right audience.

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