Apr 02 2020

Here’s you Small Business Loan tutorial

So we’ve spent weeks trying to compile as many programs as possible during the quarantine, both for us and for all of our fellow small business owners who are as confused as we were.
COVID-19  Relief Fund
This is available to businesses and non-profits.  It was authorized for 50 billion dollars and this loan covers payroll and expenses related to business.  Accounts payable and its up to 2 million dollars for up to 30 years at 3.75% for business and 2.75% for non profits.  This loan does put UCC lien against your business, but so does any loan that you would you get through a bank, so we think it is a good deal because interest is crazy low and 30 years is a long time to pay back.  You don’t get to apply for a specific amount.  Once you get assigned to a loan officer he’ll determine the max amount that you’ll qualify for (not necessarily need).  I don’t know the how they determine this number, but I assume it will be less that you want or need.  Once they do determine the number, you do have the option to accept less than they offer.  If it is 100,000 and you want 50,000 then you can just take 50k.
Compared to previous bank loans we’ve applied for this was easier, however, due to the heavy traffic it took us over 3 hours to apply because of pages taking forever to load. When we re-applied under the revamped website the process took roughly 10 minutes.
Documents we needed when we first applied were:
  • 2018 or 2019 business tax returns
  • Business financial information – essentially assets and liabilities
  • We also had to sign 4506-T to allow them to pull our personal tax returns
We applied under “Applicant is a business with not more than 500 employees.” Because we set our company as a S-Corp and we have less than 500 employees.  We applied as the above, but it is available for everything below:
In the application you can check a box to apply for an advance of up to $10,000. After following up over the phone, we found out we should receive this in 3-5 business days. We applied for on March 30 and have yet to receive any money.  They do ask for your bank account so it will be a direct deposit.  We will update this post upon receiving it.  To date I haven’t received an email or phone call from the SBA but as soon as I do I will update this blog.
Here is a website I found today that is super helpful in educating me on the difference between the two loans.
One thing that did stick out to me was this…
Borrowers may apply for different SBA loans – PPP loans, EIDL loans, non-disaster SBA 7(a), 504 and micro-loans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). If you accept the EIDL loan, and you subsequently qualify for the PPP loan, you can re-finance the EIDL loan with the PPP loan.
This being said I did call the EIDL hotline and was told you can’t apply for both, however, my bank (Wintrust) and this website said you are able to apply for both.  There is so much coming so fast so I’m pretty confident that not everyone is 100% positive.
Paycheck Protection Program (PPP)
This program becomes available tomorrow, Friday, April 2nd. Our banker sent us the following asking us to go ahead and gather the appropriate paperwork. 
The great thing about this loan is that it covers 2.5 months of payroll, rent & utilities.  If you use this loan for payroll it can convert into a grant so it’s literally free money.  If assuming you qualify for more than payroll, ie rent & utilities the grant will ONLY cover payroll and nothing money meaning you will have a loan on the extra money of the loan.  What is also great is that the first loan payment is due 6 months later for what is not considered grant.  Here are the items that PPP covers.
Permitted costs which are:
  • Employee salaries, commissions, or similar compensations (see exclusions above)
  • Health insurance premiums and costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave
  • Payments of interest on any mortgage obligation but excluding any prepayments or payments of principal
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on any other debt obligations that were incurred before the Covered Period (as defined below)
Unlike the EIDL the PPP doesn’t require ANY collateral from business or you personally.  PPP literally sounds amazing, but we don’t know fully how to apply or how long it will take to receive.
Here’s what I do know.  You have to go through a bank to get the PPP.  Each bank will handle their application process differently.  If you currently have a bank or a banker you need to go through them and you need to get in touch with them ASAP.  I was told by my banker that every bank will give their customers first priority.  If you don’t have a bank you can still apply but might not have to wait a little longer.
Also, if you have a book keeper or accountant,  I encourage you to add their name to your application because the federal government will give them a check for “helping” you fill out the application.  Even if they didn’t help you I would encourage you to add them because everyone has been affected by this and the federal government will pay them and it won’t cost you anything.
Other loans that are available!
I can’t speak about other places around the country but Chicago has a Resiliency Fund available!
Here is what they say regarding what they are offering.
“City of Chicago has established the $100 million Chicago Small Business Resiliency Fund (the Resiliency Fund), which will provide small businesses and non-profits with emergency cash flow during this health crisis. Funds will be provided to eligible businesses as low-interest loans”
Below are the loan terms.
This isn’t free money but it is a loan at a very good rate.  Also this loan requires zero collateral and I don’t see any information regarding any guarantees.
For those of you who don’ know what a guarantee is…let me explain.  When you get a bank loan, they put a UCC lien against your business.  This “guarantees” them that if something happens they have a way to have first right to secure your assets (home, cars, business equipment, inventory, etc) in the case things go sideways.
If you currently have bank loans you most likely have a UCC lien against your business.  The power of the PPP is that it doesn’t require one.  Meaning if you eventually apply for more loans the PPP might not count against your ability to get future bank loans.
Please don’t hold this blog as fact but rather just my personal opinion.  I’m not a banker nor am I an accountant.  Just here trying to help as much as I can.
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