SBA Loans for Small Business: PPP or Disaster Loan?


If your small business is in the U.S., you are well within an officially designated disaster zone, thanks to the lingering COVID-19 calamity. Why? Because the designated zone covers anywhere and everywhere in this nation.

That provides you with at least two options for getting critically needed U.S. Small Business Administration (SBA) loans to help keep your business in business in 2021: Paycheck Protection Program (PPP) or Economic Injury Disaster Loan (EIDL). But which can work best for you?

Paycheck Protection Program (PPP)

A new round of PPP funding launches April 27, with another $310 million to help small business owners, sole proprietors, independent contractors, nonprofits and the self-employed retain employees and get working capital to cover utilities, rent or mortgage payments. Loans come from SBA 7(a)-approved lenders, 100% SBA-guaranteed. Find potential lenders here. And keep in mind:

• Applications can be filed until March 31 to get in line for this funding• If you spent all of a previous PPP loan, you may qualify for a second one• There is no change to the application (copy available here)• No collateral or personal guarantees required• Maximum interest rate: 1%• Maximum term: 5 years• Maximum loan amount: $2 million (depending on payroll cost)• Maximum employees: 300 or fewer• To qualify, you need a 25% drop of 2020 quarterly revenue from 2019• Turned down for a PPP loan last time? This time, try smaller lenders, who get $60 million of earmarked PPP funding• Loan could be forgiven if requirements are met• Loan forgiveness will decrease if you reduce headcount or wages

Economic Injury Disaster Loan (EIDL)

This program is ongoing and previously ran out of funding, so don’t wait to apply. It provides loans to business and homeowners in declared disaster areas. Money can be used for fixed debt, accounts payable, payroll and other COVID-linked bills. Before applying, check out this Q&A here. And know this:

• You must show you have no other credit options. The SBA also will review your credit history and verify COVID-related losses• You can request and get an SBA EIDL emergency grant of up to $10,000 as part of your loan application, get funds within 3 days and don’t need to repay it• SBA decisions could take longer than the usual 2-3 weeks due to loan request volume• Maximum interest rate: 3.75% for businesses, 2.75% for nonprofits• Maximum term: 30 years• Maximum loan amount: $2 million for payroll, debts, accounts payable and other bills due to decreased revenue• If approved, loan funds are disbursed within 5 days

You can obtain both PPP and EIDL loans – but both loans often cannot be used for the same purpose. Example: you can’t use both for payroll. But PPP eligibility won’t be affected if EIDL covers payroll.

Other COVID-19 loan options to consider: SBA Express Bridge Loans and the Federal Reserve’s Main Street Lending Program. Check them out!

Decent is not a bank or financing company – we simply love offering useful information to support small businesses (even if it’s not about affordable health insurance coverage, which is our specialty.) That’s how important our small business clients are to us. Check out our blog for more information.

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