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Small Business: Loan Resources & COVID-19 – A guide to emergency financing for small businesses

Loan Resources: Overview and Considerations

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Note: These FAQs provide some general guidance on considering funding options. However, each business owner must consider whether any given option is appropriate for them and carefully review the terms of any loan or other agreement. This document does not constitute legal advice, and cannot substitute for expert consultation.

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General Reminders

  • Keep checking for new programs! The COVID-19 pandemic remains an evolving situation. Governments, foundations, and other organizations continue to launch or extend programs as this crisis continues. New rounds of funding for previously exhausted programs (such as PPP) may become available. Smaller one-off pools of funding may be released on short notice with narrow application windows. Stay tuned to reliable sources (see list at the end for some suggestions) for updates.
  • During this time of uncertainty, be especially wary of scams, fraud, and even generally legitimate loan providers offering predatory or otherwise unfavorable terms. Confirm that any loan provider claiming to act on behalf of any government agency (g., Small Business Administration (“SBA”), City, County, State) is in fact authorized to do so. Be wary of any fees charged to apply to government programs (and most private programs).
  •  Beware that not all relief programs are compatible (including relief besides loans/grants not covered here), including carrying restrictions aimed at preventing “double-dipping”. For example, businesses cannot receive both an Employee Retention Credit tax credit and a PPP loan for retaining the same workers.
  • Keep your key documents organized and handy (business plans, tax returns, financial statements, etc.). Though the SBA has relaxed some documentation requirements, with these documents handy, you will be better able to demonstrate your need for assistance and ability to pay and thus better positioned to apply to relief programs from the SBA and other providers.

 

Q: What federal loans or financing options are available?

Federal programs (mostly through the Small Business Administration) are generally the most widely available and reliable, as long as you meet their requirements.

 

Paycheck Protection Program (PPP)

The PPP was renewed in the December stimulus bill, but ended on May 31, 2021 and is currently closed to new applicants. Existing borrowers may be eligible for PPP loan forgiveness (see below).

 

Key Considerations

 

·         Although funds from PPP loans can be used for payroll, rent, mortgage interest, and utilities, the maximum loan amount is 2.5 times your average monthly payroll costs, up to $10 million.

·         Applicants must certify that “current economic uncertainty makes this loan request necessary to support the[ir] ongoing operations.”

·         Borrowers can subsequently apply to their lenders for their loan principal to be forgiven as long as the business maintains its payroll expenses and headcount during the twenty-four weeks after the loan is received. You’ll want to keep thorough records of all expenses for your forgiveness application. Find more information on applying for loan forgiveness here.

·         However, at least 60% of the forgiven amount must have been spent on payroll and employee benefits. The loan has a 1% interest rate and a two year term.

 

Application Process (currently closed)

 

·         You must apply through SBA-approved private lenders.  Check first with your current bank—many lenders, including the largest banks, are only accepting PPP applications from existing customers. Community financial institutions are receiving first priority in this round of PPP funding in order to increase access for minority, underserved, veteran, and women-owned businesses.

·         Otherwise, you can find an SBA-approved lender through the SBA site or contacting your local Small Business Development Center.

·         For more detailed eligibility and application guidance, see official FAQs and the SBA Interim Final Rule, as well as guides maintained by various third-party companies and publications, such as Bench (provided only as an example).

·         Second Draw PPP Loans: You are eligible for a second PPP Loan for up to $2 million (with a separate application) if you:

o   Have 300 or fewer employees

o   Experienced a revenue reduction in 2020 relative to 2019

o   Previously received and used up your first PPP Loan

 

Emergency Economic Injury Disaster Loan (EIDL)

You can still apply for an Emergency Economic Injury Disaster Loan (EIDL). Sole proprietorships, independent contractors, and many self-employed individuals are generally eligible.

 

Key Considerations

 

·         Generally speaking, you cannot use loan proceeds from a PPP loan and an EIDL for the same purposes.

·         In reviewing applications for EIDLs, the SBA assesses an applicant’s ability to repay the loan. It does not need to see tax returns and can approve a loan based on credit scores or other means of determining the applicants’ ability to repay. Applying businesses need not demonstrate their inability to get credit elsewhere.

·         EIDL proceeds (including advance) may be used for a range of expenses, including payroll, sick leave, increased production costs, debts, rent and mortgage payments.

·         Apply for an EIDL here.

 

Express Funding Opportunities

 ·         Targeted EIDL Advance funds are available to applicants in low-income communities who can demonstrate a 30% reduction in revenue during an 8-week period beginning on March 2, 2020, and who previously received an EIDL Advance for less than $10,000 or who applied but received no funds due to lack of available funding. Targeted EIDL Advance funds do not have to be repaid. SBA will contact you if you are eligible to apply. Learn more here.

·         Under the Supplemental Targeted Advance program, the smallest and hardest hit businesses may be eligible for a payment of $5,000 that does not have to be repaid. These funds can be received in addition to Targeted EIDL Advance funds. Eligible businesses are those located in low-income communities that have 10 or fewer employees and can prove more than a 50% economic loss during an 8-week period beginning March 2, 2020 or later compared to the same 8-week period of the previous year. SBA will contact you if you are eligible to apply. Learn more here.

·         Older programs that are not currently available:

o   EIDL Advance funds: This program allowed EIDL applicants to also apply for the Advance funds in an amount of up to $10,000. Although applications for the Advance are closed, you can learn about the program here.

o   SBA Express Bridge Loans: This program enabled businesses that had an existing business relationship with an SBA Express Lender to quickly receive a loan of up to $25,000 while their EIDL application was pending.

Relief for Existing Loans

Under the CARES Act, the SBA will cover the principal, interest, and associated fees for 6 months on certain pre-existing SBA loans (7(a) loans, 504 loans, and microloans). This relief is also available to new borrowers who take out such loans within six months. Other loans, including PPP loans, are not eligible for this relief. See the Guide for Small Business Owners for more details.

 

Q: What grant funding is available?

 

Although most small business funding requires repayment (e.g., most SBA loans, with the exception of any forgiven portion of a PPP loan), many organizations do offer grants that do not require repayment.

 

Federal Grant Programs

·         Shuttered Venue Operators (SVO) Grants

o   This program offers grant funding to live venues harmed by COVID-19 restrictions, including theaters, concert spaces, museums, and performing arts organizations.

o   Available funding is limited and is prioritized based on the amount of revenue loss experienced by applicants.

o   Learn more and apply directly to the SBA here.

·         Restaurant Revitalization Fund (RRF) Grants

o   This program offers grant funding to restaurants and bars harmed by COVID-19 restrictions.

o   Available funding is limited and will be prioritized based on the amount of revenue loss experienced by applicants.

o   Applications for this program are currently closed, but you can learn more about the program here, visit the application portal, and sign up to be updated as more information about RRF becomes available.

 

State and Local Grant Programs

·         The California Small Business COVID-19 Relief Grant Program held two rounds of applications in January and February. Applications are currently closed, but keep an eye out for future application windows to be announced here.

·         The LA Regional COVID-19 Recovery Fund periodically opens applications for grants of $10,000 to retail and personal care businesses. Applications are currently closed, but more information about the next round can be found here. You can also sign up to be notified when loans from the Fund become available.

 

Many philanthropic groups, corporations, and other private actors continue to roll out support programs, some of which are grants. These programs are often announced on short notice, and usually come and go quickly; we recommend that you regularly check sites like those listed in the Additional Resources section below to learn of new and upcoming programs.

Many grant programs are targeted at specific industries (such as the arts/creative industry) or communities. Be sure to check with industry groups or associations of peers working in your field to make sure you hear about any such programs.  Some past and current examples include:

 

·         Spanx Red Backpack Fund (for women entrepreneurs)(apply here)

·         Beauty Industry Relief Grants (apply here)

·         Young Creatives (apply here)

·         James Beard Relief Fund (apply here)

 

In the Additional Resources section below, you can find crowdsourced community resource guides that may contain links to newly-posted specific grants and other support programs. **Note that as the community resource guides are constantly updated by members of the public, you should independently verify the reliability of any programs listed.**

 

 

Q: What other loans are available?

Other Government Loan Programs

 

Below are major local and state government loan programs. Note that smaller cities, other government agencies, and specific elected officials have at times been able to identify limited funding sources and offered smaller aid programs—usually with very short windows to apply. Be on the lookout for announcements of these smaller programs on the various websites in the Additional Resources section below.

 

1)      California Rebuilding Fund (through the California Infrastructure and Economic Development Bank)

 

·         This program matches applications to a community development financial institution. Loans will have a term of 3 or 5 years with a fixed interest rate (currently 4.25%), up to $100,000.

·         Apply and see more details here.

Private Loans

In addition to government programs, a wide range of private banks, credit unions, and other financial institutions offer loans. The private loans below are included only as examples; the terms of financing will vary with every lender and you should make sure to understand what obligations you are undertaking. Be wary of private loans offered as “disaster assistance” that nonetheless have unfavorable repayment or other terms.

 1)      CDC* Small Business Finance (CDCSBF) C-19 Emergency Relief Working Capital Loans/Microloans

 ·         *Note that this lender is not affiliated with the Centers for Disease Control or any other government agency.

·         CDCSBF is also offering private Emergency Working Capital Loans/Microloans.

·         See more details and apply here.

2)      KIVA

 ·         Crowd-sourced loans of up to $15,000 at a 0% interest rate.

·         See more details and apply here.

3)      Jewish Free Loan Association (JFLA)

 ·         No-interest loans up to $36,000, regardless of religious affiliation.

·         Borrowers must have 2 guarantors, credit scores of 580 or better, demonstrated need, and the ability to repay the loan.

·         See more details and apply here

You may find additional private loan offerings in the Additional Resources section below, particularly in the crowdsourced community resource guides. **Note that as the community resource guides are constantly updated by members of the public, you should independently verify the reliability of any programs listed.**

 

 

Q: Can anyone provide counseling and advice? I have specific questions and/or need help walking through my application.

 

A number of both government and private organizations maintain hotlines to provide specific advice and answer questions:

 

1)      L.A. CARES Corp (LA County Business and Worker Disaster Help Center)

 

·         One-to-one business counseling and support

·         https://lacountyhelpcenter.org/

·         833.238.4450 / disasterhelpcenter@lacounty.gov

·         @LACHelpCenter on Twitter, Facebook, and Instagram

·         For questions specific to the City of LA Emergency Microloan Program, you can also call 3-1-1, email EmergencyLoans@lacity.org, or engage on social media (@LAEWDD on Twitter, Facebook, and Instagram)

 

2)      City of LA BusinessSource Centers

 

·         Free counseling and loan packaging for business in the City of LA

·         Find your local center here.

 

3)      LA Regional SBDC Network

 

·         LA SBDC Business Advisors are available to assist small business owners at no cost with questions about disaster preparedness and recovery.

·         1-866-588-SBDC (7232), or 562-938-5030 / https://smallbizla.org/

 

4)      Los Angeles Economic Development Corporation (LAEDC) 

 

·         LAEDC offers Rapid Response strategic consulting to businesses facing major challenges, confidentially and at no-cost. 

·         Email covid19response@laedc.org to receive a follow-up from LAEDC. 

 

5)      SCORE LA

 

·         A network of former business owners and executives provide free business consulting, mentoring and professional guidance to existing and emerging small businesses

·         Email office.0009@scorevolunteer.org or request a mentor here.

 

 

Q: Where can I find updates or additional resources?

 Updates

 

LAEDC Coronavirus Response Page [Frequently updated with new funding resources; scroll down to “Resource Directory” and choose the “Small Businesses” tab]

Small Business Administration (SBA) COVID-19 Guidance and Resources and sign up to receive email updates from SBA

CA Governor’s Office of Business and Economic Development (GO-Biz) 

LA Chamber of Commerce

 

 Official Guides 

Various government and other institutions have provided toolkits/guides. Because this is an evolving situation, and these resources are frequently updated, please always check the date of the latest version.

 

City of LA Resilience Toolkit

LA SBDC Network Response Guide

 

 Community Resource Guides

 A number of community groups have created and continue to maintain the resource guides below, and may be the quickest way to learn about newly-announced programs targeted at a specific industry or community.

**Note that these community resource guides are constantly updated by members of the public, and you should independently verify the reliability of any programs listed**

 CA State Treasurer’s Guide to Small Business Resources

LA Community Resources Guide

CDC Small Business Finance’s Top Tips

Little Tokyo Service Center Guide for Small Business

LA Forward Guide for the Financially Vulnerable

 

 

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