How Do I Get a Quick Infusion of Working Capital for My Startup During COVID-19?
Economic Injury Disaster Loans Can Provide Your Startup With A Quick Infusion of Working Capital
Economic Injury Disaster Loans are working capital loans that provide favorable terms to help startups and small businesses operate over the next few months.
Is My Startup Eligible for an Economic Injury Disaster Loan?
Eligible borrowers are small businesses that have suffered substantial economic injury as a result of a declared disaster. For example, the company is unable to pay ordinary and necessary operating expenses. SBA affiliation rules apply, as modified by the Act.
- Disaster declarations: All U.S. states, Washington D.C., and territories
- Loan amounts: Up to one half of the prior year’s gross profit, usually not more than $500,000.
- Permissible uses: Working capital, fixed debt payments, payroll, accounts payable, etc.
- Terms: 3.75% for up to 30 years.
- Conditions: May not be used for other purposes, such as dividends or non-fixed indebtedness.
- Collateral: Loans over $25,000 will require collateral if the collateral is available
- Personal Guarantees: Yes, for owners of 20%+
- Deferral: Yes, the first year of principal and interest payments may be deferred.
- Application Process: Online via the SBA website
- Emergency Advance: $10,000 (must be paid in three days to the borrower even if you are later denied a loan)
- Filing deadline: December 16, 2020
How Much Do the Application Fees Cost for an Economic Injury Disaster Loan?
There is no fee to apply for an Economic Injury Disaster Loan or obligation to take funds if approved. The SBA hopes to process applications in 3 to 5 days and have funds available within 30 days via a lump-sum deposit.
Note: EID loans do not preclude applying for or receiving a Paycheck Protection Program Loan or refinancing an existing EIDL into such a loan. Any advance amount received under the Emergency Economic Injury Grant Program will be subtracted from any amounts forgiven in the Payroll Protection Program, and any EIDL made between February 15, 2020, and June 30, 2020, can be refinanced into a PPP loan by adding the outstanding loan amount to the payroll sum.
Burkland offers expert CFO services, accounting services, and tax services to startups across the USA. Please reach out to us to learn more about what we can do for you, or if you have questions about federal, state and local resources available in response to the COVID-19 outbreak.