There are two loan programs within the CARES Act intended to help businesses facing an immediate need due to COVID-19. One is the Paycheck Protection Program (PPP) and the other is the Economic Injury Disaster Loan Program (EIDL). Today, John discusses some of the differences between the two programs and provides some guidance if your business is considering applying for one or both of these funds.
Good morning, John Geraci Managing Partner of LGA. Just wanted to give everyone an update on some of the loan programs that have come out. One that existed prior to the CARES Act and one that was included in the CARES Act. So lots of people are following this. A lot of businesses are interested in applying for some relief in the form of these loans. There’s two loans, there’s the EIDL loan that we talked about last week, which is the Economic Injury Disaster Loan Program. And that provides a loan up to $2 million and is available immediately. You can apply directly with the SBA for this loan. And they’ve actually expedited the loan application process. More people are interested right now in the Paycheck Protection Program loan, which was part of the stimulus bill and the CARES Act. And what’s attractive about this loan program is that you can apply for a loan based on a multiple of payroll.
And to the extent that those funds are used in accordance with criteria that are prescribed within the stimulus bill, elements of that loan can be forgiven. And so that’s very attractive for businesses who are struggling, want to keep people employed but are trying to balance how they’re going to do that. From an affordability standpoint, this loan actually provides the funds to do it and since it wouldn’t be required to be repaid it’s a very attractive loan program which is different from the idea which is required to be repaid. I wanted to let everybody know. The biggest problem that, that people are having right now is that while the EIDL program can be applied for directly through the SBAs website, there currently is no way to apply for the Paycheck Protection Program loan, also known as the PPP. That loan has to be applied for directly with SBA approved lenders.
And as of today, those lenders don’t have the guidance from the SBA in order to start taking applications. And so everyone needs to sort of take a pause, evaluate how bad they need the funds to the extent that they need the funds immediately to keep business going, they’re probably going to need to go to the EIDL, which is something they can do immediately. However, if they think that they can sort of get by for another few days, a week, possibly even a couple of weeks until the banks are ready to start processing the PPP applications, then we’re sort of encouraging businesses to do so. And wait. Just because that program has so many amazing benefits especially obviously the need, the fact that it doesn’t have to be repaid. So, we’re trying to advise our clients. The LGA Cares team has a tool to help you estimate what benefit you could get under the PPP programs. So we’re going to continue to keep you apprised as information comes to light. But again, as of today, banks can’t process the PPP loan application so well, uh, reach out to our team. We’re happy to talk through both programs with you directly and we’ll continue to send you updates as we, uh, become known. Thank you.