Best Small Business Loans (EIDL vs. PPP)
Last updated on April 11, 2020 - My Free Marketing newsletter 👀
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.
