We are facing tough times here in the United States due to COVID-19. One of the most affected groups of people in our country are the franchisees who work so hard to bring us products and services we love. For those who are considering applying to the SBA’s Economic Injury Disaster Loan Program, we have highlighted below some of the basic information one would need to understand the terms of the loans. All of this information can be found on the SBA website and has been pulled directly from there. Any small business or franchise owner can learn more about or apply for these loans on the SBA website.
- Economic Injury Disaster Loan. The SBA’s U.S. SBA Economic Injury Disaster Loan was created due to COVID-19 creating a cash crunch unlike anything we have seen in the modern era. Per the SBA web site, the SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%. The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay. In addition, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid.
- Paycheck Protection Program (PPP) Loan. The SBA is also providing a PPP loan, which will be fully forgiven (per the SBA) if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. This loan has a maturity of 2 years and an interest rate of .5%. Per the SBA web site, you can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program. Lenders may begin processing loan applications as soon as April 3, 2020.
- SBA Express Bridge Loans. These allow small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loan or be used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for a decision and disbursement on an Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.
In times like these, we all need to take a step back and help each other out. The reason for FundingFuel’s existence is to make the lives of all franchisees and everyday investors easier. In the very near future, we aim to provide similar types of loans to businesses in need of cash flow. However, for right now, it is our duty to educate those in need and help people have a better understanding of the SBA loans that have been signed into effect as the life raft for our nation.