PPP Loans & Alternative Options to Keep Your Small Business Afloat 

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Changes to the PPP Loan Program

On February 22, President Biden directed the Small Business Administration to change some aspects of the Paycheck Protection Program with an aim to provide more equitable relief to so-called mom-and-pop businesses around the country. As part of these changes, between now and March 10th, only businesses with fewer than 20 employees can apply for a PPP Loan. Through this action the administration is hoping to provide more financial support to sole proprietors, independent contractors, and self-employed individuals. (If you have more than 20 employees and haven’t applied for a PPP loan yet, don’t worry! Your application window will open back up on March 10th.)

For those who are interested in accessing relief through the Paycheck Protection Program, you can download the First Draw PPP Loan Application here or the Second Draw PPP Loan Application here. The SBA also provides a handy service to locate a participating lender in your community through the SBA Lender Match tool.

Additional SBA Loans & Grants     

While a lot of attention over the past several months has rightfully been focused on the Paycheck Protection Program, what about alternatives and additional programs to buoy your business now?

The Small Business Administration will again be your best bet for securing additional federal dollars to keep your lights on. While these programs generally have more favorable terms and lower interest rates than loans from private banks, you will need to meet certain minimum credit standards and may need to secure the loan with collateral.

SBA 7(a) Loans & Microloans

Several loan programs are part of the SBA’s standard toolkit that business owners have access to these days. Microloans, Express loans, and Standard 7(a) loans max out at $50,000, $1 million, and $5 million respectively.  While all of these loans can be used for working capital, only Express and Standard 7(a) loans can be utilized to refinance existing debt.

Unlike money from the Paycheck Protection Program, these loans are not forgivable. However, thanks to increased funding in the most recent round of coronavirus relief, these loans do qualify for SBA debt relief whereby the federal government will cover the first six months of principal and interest on loans approved before September 30, 2021.

If you are interested and think you will qualify for one of these loans, go ahead and get your application in soon; interest in these loan programs is high and changes to maximum loan amounts and debt relief qualifications are expected in the fall.

Economic Injury Disaster Loans

Often used in conjunction with PPP loans, EIDLs are low-interest, long-term loans available to business with up to 500 employees. As these loans have classically been used to provide relief to businesses impacted by natural disasters, you will need to demonstrate that your business has suffered a financial loss due to the pandemic in order to qualify.

The EIDL is intended to help struggling businesses cover up to six months of operational expenses (unofficially capped at $150,000 due to the high volume of interest) but, unlike the PPP, is not eligible for forgiveness. There is, however, a grant program wrapped up inside of the EIDL where business owners may qualify for $1,000 per employee up to a max of $10,000. This grant money does not need to be repaid.

Businesses can apply for both a PPP loan and EIDL as long as you meet the distinct requirements for each loan and use the funds for different uses. For example, you can maximize the forgiveness of your PPP loan by using the funds exclusively for payroll expenses while applying EIDL funds to other operational expenses. Before Congress made favorable changes to the PPP program, EIDL funds your business received were deducted from the amount of forgivable PPP expenses. This is no longer the case and business may take advantage of both programs without running afoul of the law.

Shuttered Venue Operators Grants

Recognizing that theaters, music venues and some museums, aquariums, and zoos, were hit particularly hard by coronavirus restrictions, the SVO grant program directs relief to this struggling industry. While not accepting applications just yet, this program will first direct aid to businesses that lost at least 90% of their revenue between April and December 2020, followed by those who saw a 70% decline, then all other qualifying businesses. Businesses will receive 45% of their 2019 gross revenue to be used for operating costs, worker protections, state and local taxes, and payments for debt incurred before February 15, 2020.

State & Local Grant Programs

As we all struggle to overcome the economic hardships inflicted by the pandemic, states and municipalities are rolling out grant and loan programs to assist businesses across the country. Reach out to your local chamber of commerce or economic development office to see what local options exist for you and your industry.

Grants.gov is another excellent resources for searching through thousands of grant opportunities around the country. Bear in mind that many grant programs are highly targeted based on business type, location, and ownership classification.

Conclusion

In addition to the Paycheck Protection Program, there are many grant and loan programs out there for struggling small businesses. While it can feel like a full-time job just to learn the ins-and-outs of all the federal, state, and local options available, making the effort to navigate these many programs could provide just the lifeline your business needs.

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