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Updated: January 26th, 2021
Update as of January 26, 2021: This article may no longer be up-to-date. Read this article for the most up-to-date information the most current round of the Paycheck Protection Program.
Given the desperate nature of the COVID-19 crisis, it may seem like throwing darts in the dark to meet the requirements during COVID-19. The government has offered trillions of dollars in financial relief, hundreds of billions specifically for emergency funding for the small business community. But, it can seem daunting to dive in.
The good news is it doesn’t have to be that way: The public and private sectors are tailoring their emergency relief programs with you in mind. So whether it’s to keep employees on the payroll, cover utilities, or other critical expenses, chances are there is a relief option that works for you.
Of course, the last thing you want to do is invest your time into the wrong loan or grant only to learn that the qualifications aren’t a match for you. So let’s run through what it takes to qualify for emergency lending.
Let’s start with the SBA’s emergency lending program, of which there are two primary facets: the Economic Injury Disaster Loan (EIDL) and Economic Injury Disaster Grant.
The EIDL program consists of loans of up to $2 million of working capital to offset lost revenue during the COVID-19 crisis. These loans have a fixed interest rate of 3.75 for small businesses and 2.75% for nonprofits and can be repaid over a term of 30 years.
To qualify for emergency lending, your business should have no more than 500 employees. You can also be a sole proprietorship with or without employees, an independent contractor, a cooperative, an ESOP, a tribal business concern, or a nonprofit. For most of these designations, you should have 500 employees or fewer. Additionally, your business should have been operational by Jan. 31, 2020.
There are also a bunch of must-not-haves included in this emergency relief program. These include being involved in anything illegal, being majorly delinquent on child support, and deriving more than one-third of gross annual revenue from legal gambling, among other criteria.
Small businesses across U.S. states and territories are also eligible to apply for an advance (Economic Injury Disaster Grant) for as much as $10,000. You can request the emergency grant as part of the EIDL application process. Funds can then be directed toward paid leave, keeping the payroll alive, added costs as a result of supply chain disruptions, mortgage/lease payments, or bills that would otherwise be left unpaid as a result of COVID-19.
The emergency advance is provided in as little as three days and doesn’t need to be repaid given the nature of the grant – even if you’re denied an EIDL. Keep in mind that the grant funds are available on a first-come, first-serve basis due to a $10 billion cap on the emergency relief program.
The latest government program to be getting lots of attention is the Paycheck Protection Program or PPP. Despite reports to the contrary, the application shouldn’t take you more than eight minutes, according to the SBA.
Before we go into how to qualify, let’s cover what the PPP is. Essentially, it is an extension of the SBA’s 7(a) loan program to provide emergency funding for small businesses. It helps you keep employees on the payroll with loans that are eligible for forgiveness for up to eight weeks of payroll and fully backed by the U.S. government. Depending on the size of your payroll, you can borrow up to $10 million, also depending on the lender.
The beauty of these emergency business loans is that while they’re federally guaranteed, you could access the loan with a fintech lender like Funding Circle as soon as April 10, pending government approval. With Funding Circle, expect an interest rate of 1% and a loan term of five years.
As for the amount of emergency funding available to a small business, it’s calculated at 2.5 times your average monthly payroll across wages, tips, healthcare and retirement benefits, and taxes. The beauty of this loan is that once you’re approved, Funding Circle can have the funds to you in as fast as a single business day. And any amount used toward qualified uses such as payroll, mortgage interest, rent, and utilities will be forgiven.
If you’re wondering whether you meet the requirements for a Paycheck Protection Program loan, chances are you do. To qualify, your business should employ 500 or fewer people, whether they’re full-time, part-time, or any other status. While there are some exceptions, this is the main criteria. This product pretty much covers the whole gamut and applies whether you’re a small business, 501(c)(3), sole proprietor, independent contractor, self-employed, tribal business concern, or 501(c)(19) veteran-owned business.
Lenders will also evaluate your application based on whether you were in business prior to Feb. 15 with employees on the payroll for whom you paid payroll taxes. They will want to know that the economic downturn impacted your business, and the funds will help it to survive during COVID-19. The funds from the emergency business loans are meant to keep employees on the payroll or pay operational overhead.
Expect to provide certain documents in the application process, including payroll tax filings and Forms 1099-MISC, as well as income and expenses if you’re a sole proprietorship. You won’t have to provide any collateral or personal guarantee. If you apply for emergency lending through Funding Circle, prepare the following:
Even if you apply for an SBA EIDL or grant as emergency funding for your small business, you could still qualify for the PPP via Funding Circle. Keep in mind that any amount forgiven under the Paycheck Protection Program would be decreased by any EIDL grant funds you get.
The economic recovery after the COVID-19 crisis hinges on the restoration of small businesses. So, expect to be able to qualify for some form of relief. Funding Circle can help: We have emergency business loans that can rescue your organization. Learn more about our COVID-19 resources for businesses and, when you’re ready, apply for emergency funding.
Funding Circle, the largest small business lending fintech is one of a few non-depository online lenders in the United States that was recently approved to provide Paycheck Protection Program loans. We offer the PPP application in four languages: English, Spanish, Mandarin and Hindi.
Jessica Holcomb is the Content Marketing Manager at Funding Circle, specializing in small business marketing and social media. She has a degree from the Fashion Institute of Design and Merchandising. Prior to Funding Circle, Jessica was a Marketing Manager at a successful social games company and a freelancer for many small businesses in the Bay Area. Her work can be seen in top retail, gaming, and financial small business resource sites.