As of December 31, 2021, the Economic Injury Disaster Loan (EIDL) program available through the US Small Business Administration (SBA) ended.
While the EIDL business grants and Payroll Protection Program (PPP) have provided vital funding opportunities for small businesses, don't worry if you missed the chance to apply. There are alternative grants available as EIDL substitutes such as ERC to provide assistance for your small business. Read on to explore these options if you were turned down or missed the application deadline.
SBA 7(A) Loans:
The SBA 7(A) loan is one of the most popular business loans offered by the Small Business Administration. This loan can be utilized for various business purposes, including business expansion, working capital, equipment, inventory, and real estate purchasing. With the 7(A) loan, businesses can borrow up to $5 million. While the SBA does not directly issue the loan, they provide backing, making it easier to obtain funding from your lender. Lending criteria are based on factors such as the nature of your business's income, credit history, and operating location. To qualify for SBA backing, your business must meet certain requirements, such as operating for profit, meeting SBA small business criteria, conducting business in the US, investing some of your own equity in the business, and demonstrating a need for the loan. It's important to note that you must not have any delinquencies with financial obligations to the US government before applying.
SBA 504 Loans:
The SBA 504 loan is another alternative option backed by the SBA. While it has a more specific purpose compared to the 7(A) loan, it provides fixed financing that should be used to invest in major fixed assets to promote business growth and job creation. In most cases, SBA 504 loans are available for amounts up to $5 million. The primary goal of a 504 loan is job creation and business growth. The funds can be used for purposes such as acquiring new buildings or facilities, purchasing machinery and equipment to support business growth, and obtaining existing land or buildings. Additionally, the loan can assist in the modernization of your business's land, utilities, parking lots, landscaping, or existing facilities. However, it's important to note that a 504 loan cannot be used for inventory or working capital, nor can it be used to repay, refinance, or consolidate debts.
SBA Microloans:
If your small business is still experiencing cash flow issues following the pandemic, the SBA microloan might be a suitable choice. These loans offer smaller amounts compared to other options, with an average microloan size of around $13,000 and a maximum loan amount of $50,000. The funds from a microloan can be used for purposes such as building inventory, acquiring business supplies, purchasing furniture, investing in business machinery and equipment, covering working capital needs, and obtaining business fixtures. However, it's important to note that the microloan program cannot be used to pay off existing business debt or purchase real estate. Eligibility for microloans depends on the lender that funds the loan, while the SBA provides backing. It's advisable to be prepared for lenders to require collateral and the personal guarantee of the business owner. You can visit the SBA website to find SBA-approved lenders for all SBA loans, as these lenders establish their own criteria for approval, separate from the SBA.
What is The Employee Retention Credit (ERC) Program?
If your business has been impacted by the COVID-19 pandemic, the Employee Retention Credit (ERC) can serve as a vital support for your company. However, it's important to act quickly to claim your ERC tax credit and ensure you meet all the necessary requirements and file your application accurately. Eligible businesses can receive up to $26,000 per W-2 employee, making it a valuable opportunity for financial assistance during these challenging times.
The Employee Retention Credit (ERC) was introduced as part of the CARES Act in March 2020, aiming to provide economic relief to business owners impacted by the pandemic. This refundable payroll tax credit serves to assist eligible employers in covering the expenses of retaining and compensating their employees during this challenging period.
It's important to note that the ERC differs from a loan as it doesn't require repayment. Instead, it functions as a refundable payroll tax credit specifically designed to support employers affected by the COVID-19 pandemic. The primary objective is to help small eligible employers bear the costs associated with maintaining their workforce and paying their employees throughout the challenges posed by the pandemic.
If you need further guidance or assistance in understanding the Employee Retention Credit (ERC) and how to claim it in 2023, we encourage you to reach out to one of our ERC tax credit specialists. Our team of CPAs is available to address your inquiries and provide personalized tax advice to ensure you successfully claim the ERC refund. Schedule a consultation with one of our ERC specialists today by contacting us. We look forward to working with you!
