How Small Businesses Can Apply For Coronavirus Relief Loans

There's a lot of money available, even for some self-employed people -- and you may not even have to pay it back.
Small-business owners can get coronavirus-related relief through two Small Business Association programs: the Economic Injury Disaster Loan Program and the Paycheck Protection Program.
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Small-business owners can get coronavirus-related relief through two Small Business Association programs: the Economic Injury Disaster Loan Program and the Paycheck Protection Program.

Small-business owners, independent contractors, sole proprietors and others who are eligible can start applying for loans through the Small Business Administration’s Paycheck Protection Program and the expanded Economic Injury Disaster Loan Program, which are part of the $2 trillion coronavirus stimulus package signed into law last week.

The PPP authorizes up to $349 billion in forgivable loans to small businesses to prevent more layoffs and allow companies keep their employees on the payroll during the COVID-19 pandemic. The EIDL can give business owners fast relief through emergency grants up to $10,000 that do not have to be paid back. But unlike the PPP, which is entirely forgivable if you meet requirements, you will have to back any remainder of an EIDL loan, minus the grant.

The EIDL program, run through the SBA, is available now to all who qualify, but the PPP is off to a bumpy start. Banks are administering the PPP and have complained about fuzzy guidelines. The final guidance was just published Thursday night, and some banks are still preparing to accept applications. “Many banks are still writing code,” said Karen Miller, the former head of the SBA under the Obama administration.

Getting these PPP loans out is an ambitious goal for the SBA. ”$349 billion is 10 times the record year of SBA-guaranteed loans in 2010,” Miller said. “It is a Herculean task to get this out and distributed in weeks or months.”

Here’s what we know about how small-business owners can apply for these loans:

There are multiple ways for small businesses and small-business owners to get SBA relief.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act expanded the SBA’s existing Economic Injury Disaster Loan Program.

Now, if your business existed on Jan. 31 and you are a small-business owner with fewer than 500 employees, or if you’re an independent contractor, sole proprietor or any other eligible entity, you can get a loan for up to $2 million. Through Dec. 31, you are also eligible for an emergency grant of up to $10,000 that the SBA says you’ll receive within three days of applying. You don’t have to repay the emergency grant, but you do have to pay back the rest of any loan you’re awarded.

You can get both a PPP loan and an EIDL loan, but you can’t double-dip and use both loans for the same purpose, the guidance states. According to the U.S. Chamber of Commerce, “if you are able to secure a PPP loan, the $10,000 grant will be subtracted from the forgiveness amount.”

When should I apply?

For EIDL: Right now.

For PPP: Since loans will be given on a first-come, first-served basis, you should apply as soon as you can. More than 58,000 Bank of America customers have applied for $6 billion in loans since Friday morning, CNBC reported.

The last day to apply for and receive a loan is June 30. Small-business owners with less than 500 employees could begin applying Friday. If you have more than 500 employees, you may still qualify if you fit the SBA’s size standards for your industry.

On April 10, independent contractors and self-employed individuals can apply for the loan through existing SBA lenders.

How do I apply?

For EIDL: You can apply for an EIDL through the SBA website. The SBA estimates that it will take you two hours and 10 minutes to apply. Be prepared to show your operating expenses. The EIDL application asks for your gross revenue for the 12 months prior to Jan. 31, 2020, for example.

For PPP: Lenders will ask you to fill out an application form, which can be found at

Be prepared to provide information like payroll processing records, payroll tax filings, or income and expenses from a sole proprietorship. “For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount,” the Treasury Department’s guidelines state.

How much money can I get from this loan?

For EIDL: You can get up to $2 million. Actual loan amounts are based on the amount of economic injury.

For PPP: The loan can equal up to two months of your business’s average monthly payroll costs from the last year, plus an additional 25%. Loans are capped at a maximum of $10 million or an amount that will be calculated using a payroll-based formula detailed in the interim final rules.

When will I get the money?

For EIDL: If you apply for the emergency grant, it should arrive within three days.

For PPP: Treasury Secretary Steven Mnuchin promised that borrowers can “apply for a loan, and be approved on the same day.”

“The hope is that that would be, if not immediate, very rapid funding. The bill is written to try to encourage that, but we have yet to see what the exact time frames are,” Miller said.

What can this loan be used for?

For EIDL: You can use this for your fixed debts, payroll, accounts payable and other bills that could have been paid had the COVID-19 pandemic not occurred.

For PPP: The core purpose of this loan is to keep your small business staff paid and employed. The majority of this loan is meant to be used on paying your employees. You don’t have to pay back the loan so long as you use at least 75% of the money you get on payroll costs. Payroll costs include employee benefits like medical and sick leave, salary, wages, commissions, tips and state and local taxes.

You can also use the loan for interest on mortgage obligations, rent and utilities that were incurred before Feb. 15.

What’s the interest rate?

For EIDL: It’s 3.75% for businesses and 2.75% for nonprofits.

For PPP: The interest rate was originally approved by the Treasury Department at 0.5%, but hours before the start deadline, the Treasury Department issued new guidance that the interest rate will be doubled to 1%.

When is my loan due?

For EIDL: 30 years.

For PPP: 2 years.

Where should I go to get this loan?

For EIDL: You can apply directly on the SBA’s website.

For PPP: You can apply through any existing SBA lender or through any federally insured depository institution or federally insured credit union, the Treasury Department states. Fintech payment providers may be eligible as SBA lenders, but Miller noted that there isn’t guidance on that yet.

“At this moment... you should go to your bank,” recommended Miller. “Banks are serving first their own customers.” This preference is because of loyalty to customers and because banks have already identified these applicants as having a real business, Miller said.

Just because you technically can apply now doesn’t mean your current bank is ready right away, however. JPMorgan Chase, the largest bank in America, was not ready to accept PPP applications through its online portal on Friday. Bank of America launched its online portal for the Paycheck Protection Program on Friday, but you need to have a “pre-existing business lending and business deposit relationship with Bank of America, as of February 15, 2020.”

Meanwhile, other banks are open to serving non-customers. Eastern Bank stated, “After we have processed applications from our customers, we will begin to review requests from non-customers.”

Miller also recommended going to your small business development center or local SBA office to find out which banks in your area are moving quickly.

For the PPP, I already laid off my staff. Can I still get a loan?

Yes, you are still eligible to get full loan forgiveness if you rehire your staff and restore salary levels for any changes made between Feb. 15 and April 26, before the end of June, according to the SBA.

“We are encouraging small businesses: Make sure you hire people back. If you haven’t let people go, don’t let people go. Because we are providing you necessary liquidity, and we’re going to get that money out fast,” Mnuchin said.

For the PPP, what happens after I use up the loan and want it extended?

That’s a good question. It’s unclear right now if Congress will expand these programs.

“The first step is to get into the $349 billion out into the hands of those small businesses who are running out of cash as we speak,” Miller said. “At the time the bill was written, the hope was, I think, that eight weeks would provide that bridge. The reality may be that it is longer than that. One hopes that Congress will respond with further provisions.”

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