Best Small Business Loans (EIDL vs. PPP)

There’s all this talk about stimulus packages and business loans, but…

Where do I even start to understand this stuff?

My tiny brain can only handle so much. I like it when things are SIMPLE. 

So I hit up my friend David Hauser to help explain all this loan jargon. 

David sold his company for $200 million a few years back..So he knows a thing or two about MONEY. 

He distills everything down so you can take quick and necessary actions for your business. 

SBA Economic Injury Disaster Loan (EIDL)

• Max loan is $2M
• If needed, you can ask for an emergency grant advance of up to $10k
• The loan will be forgiven if spent on paid leave, maintaining payroll, mortgage or lease payments
• Cannot use funds to refinance pre-existing debt or pay dividends
• Loans under $25k require no collateral 
• Interest rate is 3.75% for small businesses and 2.75% for nonprofits
• More information here 

Paycheck Protection Program (PPP)

• SBA will forgive loans if all employees are kept on the payroll for 8 weeks and money is used for payroll, rent, mortgage interest, or utilities 
• 75% of the forgiven amount must have been used for payroll
• Available through June 2020
• Loan maturity in 2 years and an interest rate of 1%
• More information here

EIDL vs. PPP, what’s the difference? 

• Size of the loan and how it’s used
• EIDL is intended to cover 6 months of operational expenses
• PPP is mainly to help cover payroll for 8 weeks

If you have available credit access (credit line, bank loans, etc.), David says to drawdown now. Aka borrow money right now to get cash to keep your business alive.

• Worst case scenario you pay a few months of interest
• If something bad happens, you now have access to cash (which no one else has)
• Even with small interest, you are buying yourself time 

David sees two main categories right now:

• Protection. Do everything you can to protect the business and cash (cut costs, get cash)
• Opportunity. Go hire the best talent and/or opportunities in advertising while CPMs are low.

 

Comment below if you’ve applied for a loan for your business.