As a small business owner, you should apply for this loan. None of us can be certain when this thing may end. In Massachusetts, we’re shut down through May 4th. Any thought that there is a hard end date to COVID-19 is a farce.

The government is giving away money to small businesses throughout the United States. During a different time, Bernie Sanders and AOC supporters would be burning gas-powered cars in the streets. Nonetheless, here we are, in the middle of a pandemic. Our economy is shut down. The government has committed to fund small businesses for 6 weeks.

As a small business owner, you should apply for this loan. None of us can be certain when this thing may end. In Massachusetts, we’re shut down through May 4th. Any thought that there is a hard end date to COVID-19 is a farce.

When states begin to lift stay-in-place orders, COVID-19 won’t magically disappear… The economy won’t boom back over night; this will be a longer term recovery. Call me a pessimist. Let’s get into it.

Three hundred and forty-nine ($349) billion for small businesses.

The CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law last week, allocating $2.2 trillion dollars intended to keep the economy alive. Three hundred and forty-nine ($349) billion for small businesses. That’s a lot of money. It will be issued on a first-come-first-served basis. In other words, get your application in.

Social Distancing need not apply when signing a $2.2 trillion bill

I’ve been talking to a lot of small business owners this week. Everyone has questions. A lot of questions. A lot of grey areas. The situation is fluid.

The Coronavirus Small Business Administration Loan program went live at 12:01am on Friday April 3rd.

At the end of the day Friday, a number of large lenders did not have live applications. Disputes around liability between the banks and the government still needs to be resolved. The program will go live at some point, and you’ll want to get your application in asap.

Below, I have highlighted a number of the burning questions to help you navigate the SBA Loan landscape.

NOTE: If you’re an independent contractor, farmer, VC-funded startup, tribal business, or business with 500+ employees, there may be different requirements for you / your business. I am not an accountant, banker, lawyer, government official, nor a CARES Act certified Individual. The following information is based on hours of research and conversations. It is by no means a fully comprehensive guide, rather a guide to help you navigate your options. You have to make the decision that’s best for you and your business. This should not be considered advice for your unique situation.

Should my business apply for aid?

In short, yes. As I previously mentioned, we don’t know when the economy will rebound, whether the recovery will be V-, U- or L-shaped, and to what extent your customers will be impacted. As much as your business may not see an immediate drop in revenue, you don’t know what the future holds.

“This program is for any small business with less than 500 employees… affected by coronavirus/COVID-19.”

The language on the SBA website reads, “This program is for any small business with less than 500 employees… affected by coronavirus/COVID-19.” There is no definition of “affected” at this point.

Is my business eligible?

If you run a small business or non-profit with fewer than 500 employees that was incorporated before February 15, 2020, you are eligible. My understanding is if you are in the hospitality or food service industry, the 500-employee limit applies on a per-location basis, rather than to the company as a whole.

Non Business? Single member LLC’s, sole proprietors, independent contractors and those who are self employed are all also eligible. You can go here to find out more: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options

Okay great, so where do I sign up?

There are two options: the Paycheck Protection Program (PPP) or the Economic Injury Disaster Loan (EIDL).  The PPP is fully forgivable. The EIDL is a loan that is not forgivable. I highly encourage you to apply for the PPP.

The PPP is fully forgivable. The EIDL is a loan that is not forgivable.

WAIT! Before you should apply for PPP you should apply for the EIDL Loan Advance. We don’t know how long it will take to distribute the PPP funds. The EIDL can give you a head start on cash in the bank.

EIDL Loan Advance

This loan is effectively a grant. You can get $10,000 in your bank account within 3 days of application submission. (We applied 3 days ago…other business owners applied 4 days ago… none of us have received money.) This $10,000 never has to be repaid. No loan repayments. No interest. Even If you are denied the EIDL loan you can keep the $10,000. Apply today.

Paycheck Protection Program

As previously mentioned, this opened for application on April 3, 2020. That’s about where the good news ends. Chase Bank isn’t accepting applications yet.
*** UPDATE: Chase is accepting applications. You do NOT need a lending relationship — just a business checking account.***

Bank of America isn’t accepting applications unless you have a “business lending and a business deposit relationship at Bank of America” — yes that’s an AND, not an OR. Let’s just say the friendly confines of Twitter isn’t holding back. We have had a bank account with BoA for 9 years…we cannot apply.

we’ve settled on submitting an application through Fundera

*** UPDATE: As we head to press, Bank of America has walked back their requirement of both a bank account and lending relationship after the always-objective Twitter hammered them. I logged in and confirmed this was… not yet up on the site. We’ll see how it plays out ***

After speaking with other small business owners — most of us who don’t qualify as “having an existing banking relationship” — we’ve settled on submitting an application through Fundera. It’s a great option, the only caveat being, as Brad from Fundera told me,

“Fundera is working with various banking partners that are actively seeking to work with new clients, unlike other banks that are starting to only work with existing clients.”

In other words, it’s the WIld West out there and we’re not sure who you’re going to work with to finalize your application.

Through Fundera, the application process is rather straight forward. You will need to provide additional information once Fundera swipes left on your behalf and you get matched with a bank or credit union who will finalize your application.

PPPEIDLLength of Loan2 Years10 YearsInterest Rate0.5%3.75%Application Period EndsJune 30, 2020December 31, 2020Eligible for forgiveness?YesNoPersonal Guarantee?NoYesPrepayment Penalty?NoUnclearAmountUp to $10MM (2.5x Mo Payroll costs)Up to $2MMUse of Funds

• Payroll
• Benefits
• Rent
• Utilities
• Existing Interest

• Payroll
• Opex
• Existing AP
• Fixed Debt

Payment Deferral6 mo.12 mo.

Economic Injury Disaster Loan
I won’t go into detail as it’s not recommended and I have not done deep-dive research beyond what is in the table.

So I can get the PPP loan forgiven?

Yes. You can get the total amount of the PPP loan forgiven.

Forgiveness is limited to the first $100,000 that an employee makes. In addition, you must meet the following criteria in order to qualify for forgiveness:

1. The funds must be used towards payroll, mortgage interest, rent,and utilities
2. Maintaining or “quickly” rehiring employees and maintaining salary levels
3. Rehiring people that you previously laid off
4. Seventy-five percent (75%) of the total amount of the loan is used towards payroll
5. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Forgiveness is limited to the first $100,000 that an employee makes.

Adding to #5 above, forgiveness is not “all or nothing.” If you reduce your headcount or payroll costs by more than 25% during this time, then the amount eligible for forgiveness will also reduce.

Note that there is no clear language around what that reduction will be. The bank who loans you the money will end up determining what the reduction in forgiveness will be in the event you reduce your headcount or reduce your total payroll amount by more than 25%.

How do I get the PPP loan forgiven?

You will have to apply for forgiveness with your bank and provide documentation as to how the funds were used. The bank will make a determination of forgiveness within 60 days of your application.

Hopefully this helps guide you in the right direction.

Now go get your application in!

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