by Justin Aufdermauer
Federal Aid for Small Businesses is still available, and it is being overlooked by many small businesses. We get it — there has been so many programs to help small businesses that it’s hard to keep them straight. But there are thousands of dollars still out up for grabs through the COVID-19 Economic Injury Disaster Loan (EIDL) program for businesses, sole proprietors, independent contractors and private nonprofit organizations, so this update is worth your attention. (Agricultural enterprises are not eligible for these specific programs, but there are different programs for agriculture.)
Tillamook is categorized as “economically depressed” along with most of rural America by the Small Business Administration standards, which means we have new EIDL advance opportunities beyond the initial, forgivable advances. This means that you may be able to receive thousands of dollars in what is effectively grant funding. We have done the research for you, and we know firsthand to how the program works, because we received our forgivable advance last week.
But first, let’s rewind to 2020 when the COVID-19 EIDL program was first released. At that time, the Small Business Administration touted that any business who applied to the program would get a $10,000 advance that was forgivable and would not need to be paid back as part of their loan. This was confusing to many as it rolled out because as the SBA later changed the advance to be $1,000 per employee, up to $10,000 total. Also confusing was the fact that you didn’t have to accept the additional loan to get the advance. Bottom line: If you applied, you received an advance equal to $1,000 per employee and then got to choose a loan amount. Regardless of whether you took that loan or not, you got to keep the advance as a grant as long as you used it for operational expenses.
Fast forward to 2021 and the release of the American Rescue Plan. In this package the SBA was directed to offer what is being called a “Targeted Advance.” This additional advance is open to economically depressed areas like ours, and it is an opportunity for businesses to receive the difference between what their initial advance was and the full $10,000 that was originally intended for the advance, as long as they:
- Can demonstrate more than 30% reduction in revenue during an eight-week period beginning March 2, 2020, or later.
- Have 300 or fewer employees.
For example, if your business had three employees, it would have originally received $3,000. The targeted advance would provide an additional $7,000 to make the grand total $10,000.
And then there’s the icing on the cake — also in the American Rescue Plan. Some small businesses in economically depressed areas also became eligible for a “Supplemental Targeted Advance,” which provides an additional $5,000 forgivable advance on top of the first two advance programs. This advance is only available after you have received the full $10,000 from the previous two programs; it brings the grand total of EIDL “grant” funding to $15,000 per business. To be eligible for this advance, applicants must:
- Prove more than 50% economic loss during an eight-week period beginning on March 2, 2020, or later, compared to the same period of the previous year. Applicants need to provide gross monthly revenue (all forms of combined monthly earnings received, such as profits or salaries) from January 2019 to the current month-to-date
- Have 10 or fewer employees.
The advances are only available to businesses that apply for the EIDL loan. Again, you don’t have to actually accept the loan, but you do have to apply to the program to be able to access the forgivable advance money.
In short, if you haven’t applied for the EIDL program at all, you are essentially leaving a “grant” of $15,000 on the table. If you have applied for the program but haven’t sought either of the new, targeted advances, you are potentially missing out on thousands of “grant” dollars.
During the first year of the pandemic, the Chamber sent out weekly updates to help local businesses obtain millions of dollars through federal and state programs. This EIDL advance money is allocated to businesses and will head to communities around the nation soon. Let’s bring it home to stimulate our local economy!
In addition to the advances, the EIDL program has increased the loan limits for businesses that might need additional funds. There are restrictions on how these funds can be used, but a game changing program update now allows you to pay off existing debt with these loans. For some businesses, this could be a good option to lower debt and loan payments because the EIDL loans run on a 30-year amortization and have an interest rate of 2.75% (non-profit) to 3.75%, with payments deferred for two years from loan origination.
Stay tuned for a future article on this and the Employee Retention Tax Credit Program, another financial recuperation opportunity for local business.
And in the meantime, I encourage you to begin working on your application for the EIDL program and targeted advances. To start your loan application and receive the first advance, visit covid19relief.sba.gov. If you have already applied for the program, visit your online portal to find options to apply for the new, targeted advances and loan increases.
As always, if you have questions or need help, I am happy to assist you. Give me a quick call at 503-842-7525 or email email@example.com.