Why this SBA loan program is a game changer for small business owners in 2021

If you have kept up with me this past year, you have probably come to realize a simple fact that I am passionate about helping small business owners not only survive but thrive in this post-pandemic world. Often small business owners that I have encountered are deeply passionate and bumble folks, people who do not want a handout. In fact, they will put themselves and their business in harm’s way before asking anybody for help, nevermind the federal government. Here is the deal if you are a small business owner in 2021, then you cannot afford to think in such manner anymore. Here is why – while the federal government wreaked havoc on small businesses specifically the leisure, hospitality, and fitness industries, it has a redeemed itself by issuing some much-needed relief. The most well-known example is the Paycheck Protection Program (PPP), but there are others that have gone under the radar.

The Economic Injury Disaster Loan aka the EIDL happens to be one of those that has gone without much attention or notice. Luckily unlike the PPP which has a hard deadline of May 31st, the EIDL does not expire till December 31st, 2021. Now you may be thinking, hey I have plenty of time to apply, I will just sit back and relax. Well, I am here to tell you that time is running out, the longer you wait the less likely you are to either qualify or receive the right loan package for your small business. I had a recently had a client named Kathy who was $8,000 behind in rent payments to her landlord. She owns a boutique fitness studio in the central Florida area and reached out to me for help. Her CPA was not only failing to provide her with potential tax credits but was failing to educate her about these critical SBA loans and grants. Think about it, if she had not reached out for help – she would have had to not only shut down her business but potentially say goodbye to her life passion.

Here is what you need to know about the EIDL:

1.   Direct loan from the SBA

2.   Eligible for up to a max of $500,000

3.   3.75% APR (fixed) for businesses

4.   First month payment deferred 18 months.

5.   Loans over $25K require collateral and personal guarantees for over $200K.

Finally, after sitting down with Kathy, we were able to come up with a SBA loan strategy to pay down her past due rent and overhead expenses, Kathy is not only surviving but thriving in this post pandemic world. Kathy’s story is similar to a lot of small business owner stories, but the difference here is that Kathy decided to take action and reach out for help. Now you may be asking yourself, well do I qualify for this loan? A good credit history helps but is not necessary. A background check will be necessary but most importantly you must follow up with the SBA when they request additional documentation.

Here is the most important part of the process: applying for the loan. This is where you need to reach out to a CPA or your accountant to help you put together your application package. What do you need? Well, it is not as easy as you may think; not only does the SBA require you to send in various IRS forms, tax returns but you need to prepare business and personal financials. The EIDL is not just another small business loan package, it is a gam-changer when it comes to jumpstarting your business in this post pandemic world. If you want to take care of your overhead expenses such as rent, utilities, salaries, payroll, and other operating costs then you must apply!

By the same token if your business is really hurting then you may be eligible for something called the Targeted EIDL the requirements for this one are a little more stringent as it requires you to demonstrate 30% or more revenue reduction. EIDL Advances can provide up to $1,000 per employee or up to $10,000 max, this loan doesn’t require any repayment either. Nevertheless, by sitting down with your strategic accountant and being transparent about your needs, you are more likely to get closer less stressful and more cheerful 2021.