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Businesses and nonprofits look to SBA loans

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New grant program started to help businesses affected by COVID-19. File photo by Tom Brown

With the economy stuck in a deep freeze, many local businesses and nonprofits are seeking help from Small Business Association (SBA) loan programs created or enhanced by the $2 trillion federal stimulus bill. But upon closer examination, some business owners have discovered the loans are less generous and more restrictive than they’d originally thought, while others are still waiting to hear whether their applications have been approved and to receive their funds.

For example, the SBA Economic Injury Disaster Loan (EIDL) is an existing program that provides loans to businesses hurt by disasters. The stimulus bill added to it a feature providing an immediate advance of up to $10,000 to businesses, nonprofits, and the self-employed that would never have to be paid back.

But new guidance from the SBA indicates advances are limited to $1,000 per employee, up to $10,000. That means some small businesses, nonprofits and self-employed people will qualify for less aid from the advances than they had hoped for. 

“Some downtown businesses were hoping for more help from the EIDL advances, but it was apparently limited this way due to overwhelming demand,” said Dan Groberg, executive director of Montpelier Alive.  The pandemic crisis has put a significant strain on many small local businesses, he said.

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According to Groberg, many local landlords have been flexible with their business tenants. 

“Landlords are part of the community too and want to see our businesses survive,” he said. He added that local banks have also been flexible with landlords regarding mortgage payments.

Businesses, nonprofits, and the self-employed can apply for the EIDL loan and advance by completing a form at www.sba.gov. According to the website, loan advances are issued by bank deposit within three days of applying, but at least one local business that applied March 30 has not received anything yet.

The actual EIDL loan amount beyond advances up to $10,000 will be based on the application information and any other documentation that is requested by the SBA. If approved, an applicant can accept the loan, accept part of it, or decline it entirely.

The EIDL advances are for any small business with less than 500 employees (including sole proprietorships, independent contractors, and self-employed persons), private non-profit organizations, or 501(c)(19) veterans organizations affected by COVID-19.

The Paycheck Protection Program (PPP) also provides loans, but unlike EIDL loans, is offered through banks instead of directly with the SBA. 

Created by the stimulus bill, PPP loans can be used for payroll, rent, mortgage interest, or utilities. Currently, a portion of the loan equivalent to 8 weeks of payroll after the loan origination date can be forgiven, but demand for the PPP loans may exceed the $350 billion authorized for the program. Last Friday, the Bank of America alone received requests for $22 billion in loans. 

Locally, many banks plan to take applications for the PPP program, according to Groberg, but some of them are not yet set up to take applications.

The PPP program is available for any small businesses with less than 500 employees (including sole proprietorships, independent contractors, and self-employed persons), 501(c)(3) non-profit organizations, 501(c)(19) veterans organizations, or tribal businesses affected by COVID-19. Other types of nonprofits are not eligible for PPP loans, according to the SBA, but they can apply for EIDL funds.

Meanwhile, small business owners who operate as sole proprietors, independent contractors, and so-called gig workers are eligible to apply for unemployment for themselves as a result of the stimulus bill, whether they are unemployed or only partially employed. They will be eligible for an extra $600 per week on top of regular unemployment benefits through July 30, as provided for in the stimulus bill.

The Vermont Department of Labor is preparing an online application for self-employed individuals that it said may be online within a week or two. Some details of how the system will work for the self-employed were revealed in an online Department of Labor Town Hall that was recorded and can be viewed here.