Hello again. During this crisis, I am doing regular updates to keep small businesses and the self-employed informed of financial support, legislation, resources, and other help available to them.
Remember: I am doing a Facebook Live Monday to Thursday at 1pm EDT/10am PDT on Facebook to keep you updated and answer questions. And if someone forwarded you this newsletter, you can sign up at PlanningShop.com.
FRIDAY! FRIDAY! FRIDAY!
The specific rules relating to aid available to small businesses, the self-employed/independent contractors in the CARES Act (stimulus package) are supposed to be out by Friday. That means that everyone—INCLUDING ME—is operating somewhat in the dark.
So I’m trying to point you in the right direction to get prepared but keep in mind… SPECIFIC RULES WILL BE COMING OUT FRIDAY.
EIDLs: Economic Injury Disaster Loans
Today, I’m going to talk about EIDL (disaster) loans and the $10,000 small business GRANTS. There are other loans and help available that I’ll address in other newsletters and Facebook Live
First, I want to point out again, that the rules for these grants and loans—especially for forgiveness for the loans—are expected to come out this Friday, which means that the exact specifics are not yet known.
But I want to use this newsletter to help you become somewhat better acquainted with one of the most important types of small business financial aid: EIDLs.
Last night I listened in as an SBDC consultant walked a small business owner through her various options right now to get financial help. The business owner has a successful, one-person (herself) wholesale business, and all her business stopped suddenly as a result of the coronavirus pandemic. She literally has no orders coming in and payment on previous orders has slowed to a trickle. She has no payroll employees, works from her home, but has bills, both business and personal.
She’s not alone—all kinds of businesses have seen the sudden braking of their income as a result of the natural disaster that is the coronavirus pandemic.
The consultant pointed this business owner towards an EIDL loan. “I don’t need a loan,” she protested, “I need money now.” And I don’t know how and when I’ll be able to pay it back.
The consultant persisted because as it looks now (remember rules come out Friday):
- EIDL loans are going to be the fastest source of money. Banks and other lending institutions are administering these as a way of getting the money out faster. Less worry about backup at the SBA.
- Unemployment—which this business owner is likely to now qualify for—may take longer to get because of the crowds in the unemployment lines.
- Credit worthiness will be determined by credit score, not by ability to repay the loan.
- Rates are 3.75%—much lower than credit cards or other ways to manage cash flow.
- Small loans won’t need a personal guarantee nor a pledge of collateral.
- These are available to sole proprietors, independent contractors, and non-profits.
- No loan fees, guarantee fees, or prepayment fees.
AND A PROVISION YOU WANT TO CHECK OUT
- $10,000 cash advance on the loan that can be forgiven if spent on paying workers (including yourself), all payroll costs (such as health insurance, retirement, state/local taxes), rent, utilities, other specific costs.
- There may be more than $10,000 that can be forgiven if spent on the same types of expenses (not yet clear).
- This MAY also apply for the self-employed and those who work from home! In other words, you may be able to get forgiven for the portion of the loan you deduct as a home office expense, home office utilities, and paying yourself (the profits left at the end of the year).
REMEMBER—THE RULES COME OUT FRIDAY—SO THIS IS NOT YET DEFINITIVE
If you don’t like the idea of a loan because you’re not the kind of person who needs loans, cut that kind of thinking out! The coronavirus pandemic is a NATURAL DISASTER, both in reality and as declared by the US government. You’re not responsible for the situation you’re in. It doesn’t matter how good of a money manager you were or how you ran your business, this is a completely and totally unexpected event that you could not prepare for. If you need a loan, get a loan. Period.
Now, it’s going to take some work to apply for these EIDL loans. On the website, it says the application should take 2 hours and 10 minutes to apply. I suspect it may take some additional work to be able to answer some of the questions. And you have to self-certify that you are telling the truth.
The loan application can be found here.
And, as always, I recommend talking to an SBDC consultant. Find your local SBDC here.
Stay well. Stay home (if you can). We’ll get through this together.
Copyright Rhonda Abrams, 2020