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Coronavirus Emergency Loans – Where to get COVID-19 Emergency Loan?

Last updated: January 27,2021
Originally Published: August 03,2020
by Rosen Valchev

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Don’t give up. Remember there is always an alternative

The Coronavirus emergency situation turned the whole world upside down. As a fast-paced society, we were constantly on the move doing all kinds of business. Then the Coronavirus pandemic came. Suddenly we found ourselves isolated in our homes.

This was a major hit for businesses in almost every industry. The stock market crashed several times in 2020 setting new plunge records. Oil prices sunk as well. But big corporations are not the only ones that suffered.

Actually small businesses suffered the most. More than 66%(two-thirds) of micro and small businesses have been strongly affected by the COVID-19 crisis. Furthermore, most of these businesses were in a great threat of shutting down permanently in just a couple of months.

That is why the US government took immediate measures to aid small business owners. The CARES Act didn’t help individuals only. It also provided small business owners with the opportunity to get a Coronavirus emergency loan to get through the crisis.

What is the coronavirus emergency loan?

The main objective of Coronavirus emergency loans is to keep small businesses running and help them keep their employees during the pandemic.

The Coronavirus emergency loans are 100% backed by the government. But there isn’t only one coronavirus loan type as many think. Here are the different COVID-19 emergency loans that exist:

 Paycheck Protection Program (PPP) Loan

The government set aside $350 billion through the CARES act to lend out and help small businesses. The Paycheck Protection Program (PPP) loan is what most people refer to as a Coronavirus emergency loan.

However, the PPP program run out of money pretty fast. The officials decided to approve an additional $310 billion to restore the PPP loans.

The PPP application deadline has been previously June 30, 2020, but it was recently extended through August 8, 2020. So you still have a chance to apply although many lenders and banks have stopped accepting new applications.

The main idea of PPP loans is to help businesses keep their employees.

The money you get from the PPP should be used for payroll costs, paying interest on mortgage, rent and utility expenses and interest on other loans obtained before February 15, 2020.

The good news is the PPP loan can be forgiven if you spend the money as indicated above. But more on that later.

You are probably wondering where and how you can get these emergency loans. Actually it is not as hard as you imagine.

You can apply for a PPP emergency loan through a local SBA (Small Business Administration) lender. Here is a PDF list of these lenders and the states they operate.

Economic Injury Disaster Loan

The Economic Injury Disaster Loan, also known as the EIDL program offers to give small businesses low-interest loans. To be eligible for an Economic Injury Disaster Loan your business should be in an officially declared disaster area or contagious county.

The EIDL program was also paused due to a lack of funds. It resumed on June 15th. Unfortunately, on Jul 11 it became clear that the SBA has allocated all of the funds($20 billion) once again.

However, you can still apply for an EIDL here. These loans are obtained directly from the SBA and not from accredited lenders like the PPP loans. Hopefully, the SBA manages to do another round of EIDL funding soon and honor the incoming applications.

But how long does it typically take to process these emergency loans?
Maybe you already applied for an EIDL but haven’t received any notice yet. Don’t worry. It can take up to 21 days for the SBA to contact you and make a decision. 

Here are the main characteristics of an Economic Injury Disaster Loan:

  • 3.75% interest rate for eligible for-profit businesses
  • 2.75% interest rate for eligible private non-profit organizations
  • $2 million maximum loan amount
  • 30 years of loan maturity
  • The U.S. treasury funds these loans
  • For loans up to $25,000 no collateral is required
  • No personal guarantee required for loans under $200,000

The funds you get from an EIDL can be used however you like. You don’t have the same restrictions as with PPP loans. For example, you can use an EIDL to consolidate other debt.

SBA Express Bridge Loan

The SBA also released the Express Bridge Loan (EBL) Pilot Program which is meant to provide immediate aid to struggling business owners.

The Express Bridge Loan is a short-term, expedited loan for up to $25,000 and it is meant to serve as a temporary solution. The goal is to support businesses until they obtain larger loans from the PPP or EIDL programs if needed.

A downside to the EBL is that you can only obtain it from an SBA express lender. On top of that, you need to have an already existing relationship with this lender before the crisis came in order to get the Express Bridge Loan.

What will lenders be looking for?

Above all, people are asking one question. Frankly the most important one.

Am I eligible to get a COVID-19 emergency loan?

So let’s take a look at the eligibility criteria for COVID-19 emergency loans. 

You can get an emergency business loan for a sole proprietor. You can also get an emergency loan if you are an independent contractor, or self-employed. All small businesses with fewer than 500 employees are eligible as well.

small business yes we are open coronavirus emergency loan

Nevertheless, there are some exceptions to the 500 employees rule. For instance, if your business is under NAICS 72 –  Accommodation and food services sector you can have up to 500 employees for each physical location.

Another option is to be defined as “small” by the SBA size standard. That could allow you to have more employees for certain types of businesses and still be considered as “small”.

Your business should also have a maximum tangible net worth of up to $15 million to qualify. There are income restrictions as well. You can’t have more than 5 million average net income for 2 full fiscal years prior to your application.

Also if you are a 501(c)(3) organization exempt from federal income tax with fewer than 500 employees you can get an emergency loan. Similarly, a 501(c)(19) Veterans organization or a tribal business concern can qualify if it meets the SBA size standard. 

To summarize all small businesses with fewer than 500 employees (or more depending on the size standard set by SBA for the specific industry) can qualify and get a Coronavirus emergency loan.

That includes regular for-profit small businesses, non-profits, sole proprietorships, independent contractors, self-employed individuals, tax-exempt businesses, tribal businesses, and veterans organizations.

Read More: When should I get a personal loan?

What is the process of obtaining a COVID-19 emergency loan?

To begin with, you need to fill in the corresponding loan application. We already gave you a link for the EIDL above. You can access the PPP loan application by downloading the PDF on this page.

You will also have to submit a good faith certification and proof that your business has been adversely affected by the COVID-19 crisis. So the point of the loan is to support your business operations and not just for the mere opportunity of getting a good offer.

For the PPP loans, you have more restrictions on your spendings. As mentioned you will need to use the money to retain employees and keep payroll proceeds or make lease, mortgage, or utility payments.

Furthermore, you can’t have another loan application or an active loan that will be used for the same purpose described in the application. So you can have only one Coronavirus emergency loan. 

That may seem restrictive at first glance but the programs are actually more flexible.

For example, there is an opportunity to fold an Emergency Disaster Loan into a PPP loan. You can always reach out to SBA and ask for more information and the flexibility they can offer for your existing loans or loan applications.

Note that sole proprietorships, independent contractors, and self-employed individuals will also need to submit other supporting documentation with lenders.

For example, income and expenses from a sole proprietor, payroll tax filings, and Forms 1099-MISC.

How much can I borrow?

Again this depends on the type of emergency loan. We already discussed that for EIDL the maximum amount you can borrow is $2 million and for the EBL that amount is just $25,000.

But what about the maximum threshold of PPP loan? You can borrow up to $10 million if you are a small business owner and you qualify. The way you calculate how much you can borrow is simple. 

The maximum amount you can get can be up to 2.5 times your average total monthly payroll costs for 2019. For businesses that opened in 2020 the average total payroll cost is calculated for the months of January and February 2020.

Unfortunately, if your average monthly costs for payroll is $10,000 ($120,000 a year) you can’t get more than $25,000 (2.5 x 10,000) even if you need more money to support other business operations.

For employers who own small businesses the following is considered payroll costs:

1. Any salary, wage, commission, or similar form of compensation as well as any cash tip or equivalent.

2.  Payment for parental, family, vacation, medical or sick leave

3. Payment for retirement benefits and group health care payments.

4. Allowance or dismissal of separation. Also, any payment of local or state tax assessed on the compensation.

The PPP amount for sole proprietors, independent contractors, and self-employed individuals is calculated based on their net income per year.

Sadly, you can enter a maximum of 100,000 net income for a year even if you make more. That gives you an average monthly salary of $8,333 and a maximum loan amount of $20,833.

The good news is that you have a six months payment deferral which means you can start paying your monthly installments half a year after your loan origination date. 

Also, you have a ridiculously low-interest rate of 1% and 2 years to repay the loan.

Will this loan be forgiven?

We already touched on the topic that PPP loans can be forgiven. This, of course, happens under certain circumstances.

The main point of emphasis is that the whole loan amount can be forgiven. If you spend the amount of the loan within 8 weeks of borrowing primarily on payrolls you can walk away debt-free.

You can also use the loan to pay interest on a mortgage, pay rent and utility expenses and pay interest on other loans obtained before February 15, 2020. But these costs shouldn’t exceed 25% of your loan amount for the loan to be forgiven.

For example, if you borrowed $10,000 you should spend at least $7,500 for payroll.

Unfortunately,  Economic Injury Disaster Loans are not forgivable in the way that PPP loans are. There isn’t a clause that allows EIDLs to be forgiven.

However, a portion of your loan can be covered by the SBA in specific circumstances. Firstly, the business should cease to exist and dissolve officially.

After that when it is obvious you are not able to repay the loan the SBA can pay between 50%-75% of your debt to the bank. The rest is your responsibility.

If you can’t pay the remainder and SBA doesn’t accept the maximum amount you offer to pay they can take legal action to collect the funds.

What if an Emergency Loan Isn’t an Option for Me?

Maybe you don’t qualify for an emergency loan or missed your chance to get one. It is also possible that an emergency loan just isn’t the right fit for you and you can’t get as much funding as you need.

You don’t have to give up. Remember there is always an alternative. You can check other loan options at websites like guidetolenders or smarter loans.

It is easy, completely free, and doesn’t hurt your credit score. When you compare different lenders and offers there is a high chance to find the loan that suits you best.

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