The US Congress has approved additional funding for both EIDL and PPP loans. Businesses are being advised to get their loan applications ready for when the SBA opens the applications.
Small businesses, nonprofits, and independent contractors in Colorado alone have received over $7 billion in payroll loans. EIDL loans are low-interest loans to help small businesses with their cash flow throughout the coronavirus pandemic. Congress has seen that it is necessary to give businesses a second loan as the effects of Covid-19 continue.
The second round of Paycheck Protection Program will be a fund of $320 billion, some of which will be put aside for community credit unions and small financial institutions. If the PPP loan is used as per the legislation’s guidelines, they will be forgivable.
“We are facing an uncertain future. We do not know how long it will take to eradicate coronavirus and return to normal. People and businesses who lost their income during the pandemic need help to survive. Now more than ever, politicians must work together to create a corona aid relief bill to ease the financial suffering of their people,” says Brad Nakase, who is one of the best employment lawyer in California and awarded the prestigious “American Institute of Trial Lawyer’s 2020 Litigator of the Year.”
How to Apply for PPP funding
- Check the eligibility of your business for the loan.
- Gather any documents that are needed to prove your eligibility. Mortgage documents, proof of lease, payroll tax filings, and utility payments may be required.
- Get in touch with your payroll bank and find out if they can process your PPP loan.
- If you are waiting to hear about a PPP loan application, contact your lender and ask them to double-check they have all the necessary paperwork, and it has been filled out correctly.
The second round of EIDL funding is $60 billion. This is a low-interest loan to help businesses recover. It is estimated that in Colorado alone, EIDL will help 600,000 businesses.
How to Apply for EIDL funding
- The SBA has an application guide for EIDL on their online portal. This guide will walk you through the application process and allow you to check eligibility.
- Gather any documents that you need to accompany your application. A personal financial statement, liability information, and your most recent tax return will be required.
- Apply through the SBA portal.
- Check the status of your loan application by contacting the Small Business Association.
Can I Apply For Both PPP and EIDL Loans?
Yes, you can. EIDL and PPP funds must be used for different purposes.
If you do not use the EIDL loan towards payroll costs, then you can also apply for a PPP loan and use it towards your payroll.
If you did use the EIDL to cover payroll costs, then the PPP is used to refinance the EIDL loan.
The maximum amount you can borrow as a PPP loan is $10 million. There is a two-year maturity, and the interest is fixed at 1%.
The maximum amount you can borrow as an EIDL loan is $2 million. There is a 30 year maturity and the interest is fixed at 3.75%.
If you apply for both at the same time, you can accept a PPP loan and wait to close on your EIDL loan approval. You will need to make a decision within 60 days of the EIDL approval date. It is important to remember to document the uses of the funds from both loans if you accept them both.
- For your PPP to be a forgivable loan, 75% must be used towards payroll costs.
- The amount up to $10,000 that you receive as the EIDL Advance program will be deducted from the PPP. This portion will be forgivable.
- The deadline for the second round of PPP funding is the 8th of August. The deadline for an EIDL application is the 31st of December. Therefore, you can get a PPP loan and then at a later date, apply for an EIDL loan.
Additional CARE Act funding
Businesses are waiting for applications to open for PPP and EIDL loans after Congress announced they are funding a second round of small business loans. Prepare your loan applications and supporting documents now, so you are ready to apply as soon as it opens. Here are some tips for preparing your application.
- If you have applied for a PPP loan and want to chase it, talk to your lender.
- If you are chasing a submitted EIDL application, contact the SBA to chase.
- Make sure your bank can work with the SBA if you are a sole proprietor, independent contractor, or self-employed.
- Set up a bank account if you do not already have one, so you are ready to receive the relief funds.
- Calculate the average monthly payroll, including retirement and eligible health care contributions so you can fill out the paperwork.
- Draw up a plan for how to use the funds over eight weeks. Check the legislation guidelines so you can maximize the amount of the loan that can be forgiven.
- Speak to your accountant for any questions or guidance.