The federal government made emergency funding available to small businesses to help them survive the pandemic, but the economic effects of the ongoing caution required to prevent the spread of COVID-19 last well beyond the spring of 2020 shutdown.  If you were lucky enough to receive a Paycheck Protection Program (PPP) loan, you have probably already used up the money you received, even if it was only for the limited number of uses acceptable under the PPP guidelines.  If you didn’t get a PPP loan, it is because demand for the forgivable loans was so high that two rounds of funding ran out quickly.  Small business owners have other options for funding their businesses during these difficult times, including new government initiatives to support small businesses.  Consult an Alabama small business lawyer about accessing funds and using them to the best possible effect.

Emergency Funding That Arrives Quickly

Coronavirus cases are on the rise in Alabama, as well as in other states; businesses have been allowed to reopen, but that does not mean that recovery will be easy.  While the state government is hesitant to issue another stay-at-home order, customers and employees might not be so quick to want to go out in public when they see that COVID-19 still presents a real danger.  It may be necessary to rethink your long-term business strategy, but while you are doing that, you will need short-term funding to cover your current overhead costs until you can implement your new strategy.

The Difference Between EIDL Loans and PPP Loans

The Small Business Association is offering Economic Injury Disaster Loans (EIDL) to small businesses adversely affected by the COVID-19 pandemic.  EIDL loans lent to small businesses have an interest rate of 3.75 percent, but when the recipient is a non-profit organization, the interest rate is only 2.75 percent.  The term for repayment is 30 years, and the first payment is due one year after the borrower receives the loan money.  Applicants can get a $10,000 advance on their loans by checking the appropriate box on the application.  You can get the $10,000 within three days of submitting your application, while the SBA is still processing your application; after your application has been fully processed, you can get the full loan amount.

By contrast, PPP loans have an interest rate of only one percent.  The loans are forgivable if the borrower uses at least 60 percent of the loan amount for payroll and the rest for other PPP-approved expenses.  If the loan is not forgiven, then it must be repaid within five years.  With either of these loans, though, there is a danger that the loan money could be counted as taxable income on your 2020 business tax return.

Reach Out to an Attorney Today

Borrowing large amounts of money for a business is a serious decision, even if the interest rates are low, and it is a good idea to consult a small business lawyer before you apply.  Contact the Alabama business & corporate litigation attorneys at Cloud Willis & Ellis for help.