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4/8/2020 Update on SBA Programs – EIDL & PPP

Lizzie Fletcher, Congresswoman representing the 7th District of Texas, and Tim Jeffcoat, District Director of the U.S. Small Business Administration Houston District Office, put on a webinar today to provide an update on the SBA programs available for small businesses during the COVID crisis.

Ms. Fletcher is hosting these small business webinars with some frequency, so visit her website to sign up for one.

The main programs discussed were the Economic Injury Disaster Loans (EIDL) and the Paycheck Protection Program (PPP) Loans.

You CAN Receive a PPP AND an EIDL Loan

But, you cannot claim your payroll costs under both programs. So, for example, you could submit your payroll costs under the PPP program and only include operating expenses under the EIDL program. (I’ll be honest, I didn’t see where you specified your payroll costs on the EIDL loan application, so it must come up later in the application process?)

Just don’t forget, the EIDL is a loan with no forgiveness component. You will repay that loan in full. However, if you find the PPP funds are not going to carry you far enough, you have until the end of the year to apply for an EIDL loan.

No Update on Timing of PPP Loans

Mr. Jeffcoat did not have any specific updates on the funding of PPP Loans, since that is being handled by the banks, who then correspond with the SBA to obtain the 100% guarantee. However, he did mention that the sba.gov/tx/houston website lists several SBA lenders in the area and notes those that are accepting applications from new customers. I suspect each district office of the SBA is providing similar information.

Another $250 Billion to Be Provided to fund PPP Loans

I don’t know what procedural steps need to occur to make it official, but both the President and Congress have said they are already planning to add another $250 billion to the $349 billion already allocated to the PPP loan program.

Treasury is to Issue More Guidance by the End of Today

What’s the problem with the PPP Loans? Well, the banks are freaking out because they don’t want to end up in legal trouble if they don’t perform enough due diligence on these loans. Plus, they want a place to sell off these loans, so their Balance Sheets don’t get destroyed with a bunch of one percent interest small business loans. Apparently, the banks don’t feel good about how the last economic meltdown affected them regulatory-wise, so they are slow to jump back into the arms of the government.

The good news is D.C. is really working on resolving this and the Treasury Department has promised to issue more guidance by the end of today helping banks resolve these issues so they will move forward on the loans.

What You Need to Know if You Applied for an EIDL loan

SBA determines the amount of Grant and Loan

If you applied on the SBA.gov website, you probably noticed that you were never asked how much money you were requesting. That is because on both the loan and the grant, the SBA will determine what you qualify for based on the revenue and cost of goods sold information provided on your application.

Grants are currently being funded

The grants are funding as we speak. According to Mr. Jeffcoat, several businesses have already received their funds within 3 days. Some businesses are still waiting, but Mr. Jeffcoat says the funds should be received shortly. And remember, you will not automatically be sent the $10,000 maximum grant. The SBA will determine what you will get based on your business size. You will not receive any feedback from the SBA — the money will just appear in the bank account you provided on the grant application.

If you have not gotten any funds and are afraid you entered incorrect bank information or other issues, you can reach out to the SBA through sba.gov, but understand that even contacting them is a slow process.

Loan Decisions and Funding

The loan decision process will take as long as four weeks. At that point, you will be contacted by your SBA case manager of the amount they are offering you under an EIDL loan.

If you accept the SBA’s original offer, they will provide loan paperwork for you to sign, and after closing the loan, you will be funded the first $25,000 within 5 days. If your loan amount is greater than this, your case manager will arrange the funding of the loan remainder.

If you believe you need more funds than what the SBA offered, you may provide your case manager with more documentation, which will be then be reviewed.

The terms of the EIDL loan are 3.75% interest (2.75% for not for profits) on a 30-year term, with payments deferred for one year from the date of the loan.

Getting strange emails regarding SBA Loans?

As expected, fraudsters will jump on the SBA bandwagon and promise to fast-track your loans or help fill out the applications. Be very wary of anyone offering to help you for a fee (or free for that matter) if they are not from the SBA. If you suspect fraud, contact the SBA at https://bit.ly/2UxdAhL or 800-767-0385 to report it.