Jeremy Johnson new mug

Jeremy Johnson

If you’re confused by the alphabet soup of financial help programs, you’re not alone. As the government works with banks to hand out $2.2 trillion in individual and business help under the CARES Act, you likely have questions about what you qualify for and where to apply.

The Paycheck Protection Program is a loan that was established in the wake of COVID-19 to help businesses keep their employees on payroll during the crisis. In a nutshell, the Small Business Administration will forgive PPP loans if “all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest or utilities.”

To apply for a PPP loan, you must do so through an existing SBA 7(a) lender, federally insured institution or credit union. So start by calling the bank where you currently have your business accounts.

Ask your account manager if they can help you apply for a PPP loan. If they are not a participating lender who can help, ask your banker for a referral to a financial institution that can help you. Try to get both email and telephone numbers for another bank so you can quickly get help. Be aware that many banks are helping existing customers with PPP applications before they take on new customers. Before calling your financial institution, gather the following information: 2019 income and expenses, balance sheets, and payroll expenses.

You do not need to put up collateral for a PPP loan, and you will not have to pay the government or your lender any fees associated with the loan. Under the PPP loan, small businesses can borrow up to 2.5 times their average monthly payroll from the previous year. Businesses with less than 500 employees per location are eligible to apply.

The SBA has indicated that loan funds are available through PPP until June 30, 2020. Hurry to apply as lenders began processing PPP loan applications on April 3, and money is distributed on a first-come, first-served basis.

The other loan you’ve been hearing about is the Economic Injury Disaster Loan (EIDL). While disaster loans, also a product of the SBA, are not forgiven, there is good news for businesses. A new provision has been added to EIDLs to allow businesses to get a $10,000 advance if they are struggling financially. This $10,000 grant money does not need to be paid back. Businesses can receive the grant in a few days.

Small business can apply for more EIDL funding — up to $2 million that can be used to “provide working capital for expenses such as fixed debt and payroll costs,” according to the SBA. The interest rate for EIDL loans (not including the $10,000 grant money) is 3.75 percent with a loan term up to 30 years. New stipulations for EIDL loans include a one-year deferral on repayments (though interest does begin accruing when the loan money is given out). Business owners can receive up to $25,000 in EIDL loan money with no collateral required.

To apply for an EIDL loan, you must allow the SBA to review your business tax records. You do not need a lender to help you apply for an SBA loan, simply visit sba.gov.

Information regarding loans can change quickly, especially during these chaotic times. Ensure you are regularly checking the SBA.gov website to view those changes and respond appropriately.

Jeremy Johnson is the Eastern Idaho Marketplace Manager for the Better Business Bureau Northwest + Pacific. Contact the BBB at 208-342-4649 or email to info@thebbb.org.