By: imaubert
Read in 18 minutes

How to Apply for the SBA Injury Disaster loans (EIDL)

 

Important note:

The video workshop is only available in Spanish, but you can find a complete transcription in English below.

 

EIDL, What it is and How to Apply

Sean Salas

The SBA Injury Disaster loans (EIDL) are loans for small businesses that have been economically affected by a declared disaster. So if your state, which is every state in the United States, has declared a state of emergency, you can qualify. All 50 states are in this situation. 

The maximum loan size is $2 million. The fixed annual interest rate is 3.75% for for-profit companies and 2.75% for non-profit companies. The maximum payment term is 30 years, that is, people, 30 years! That’s a long time to repay a loan, right? And besides you can wait to make the first payment between six and up to 12 months. So this gives you even more benefits for the first payments.

The response time, says the SBA, is 2 weeks. The truth is that the example Kenny was giving you from Bank of America is similar. There are many banks, including the SBA, that are not designed to make these types of volumes, and their website has fallen several times. I don’t know, I don’t think it’s going to take two weeks, but that’s what people are saying. 

Now. An extremely important part of this loan is that when you apply, and we are going to review the application very quickly, there is an advance on the loan that you can ask for. It’s an advance of $10,000. Now I am going to tell you something that is super, super interesting: you do not have to pay the advance, ok? So suppose, for example, that you applied for the loan and then the SBA says “you did not qualify for the rest of the loan”, that $10,000 you can keep in your pocket.

Can you imagine that? I mean, it’s $10,000 that you don’t have to return! It is an advance, it is a grant. Now, if they give you more than $10,000, I already told you what the terms are, but those $10,000 is an advance that does not have to be repaid. It is a very big benefit for this loan itself and you should take advantage of it.

Now. He had said this too. This particular loan gives you more flexibility to use the money for various things: paying sick days to employees, keeping payroll, covering increased material costs, paying rent, repaying obligations you couldn’t cover, like debt, ok? So the use of capital here is much broader than the use of capital for the PPP program.

Okay? Very good. Now. I am going to review the application of this payment program. Too easy. You go to the website. Here I just showed you the website link, and I reviewed it yesterday. Believe me, it takes 10 minutes to do it, maximum, ok? So you go to the website, you are going to see something like what I am showing on the screen. You have to click on the type of applicant that you are, whether you have a business with less than 500 employees, you are an individual or a sole proprietorship without employees, etc.

Once you have passed that section, then you have to verify that you meet all the requirements. Again, the same question that we’ve been sharing with you that gives us interpretation concerns, is the first question, ok? That is the first question. But when you meet all these requirements you can continue with the application. 

Then there is the business information, which is very, very basic. The next section is information about the owners, what percentage. So, if you are the sole proprietor, you only have to put your information, and there is additional information that includes someone who is helping you fill it out; I mean, you can ask for help, and then there is no problem there, ok? 

So. This takes between 5 to 10 minutes. There is not very large calculation like that of payroll in this case, that is, there is no great science in it. Suppose they give you the advance of the money but not the rest of the money… those $10,000 in your pocket, in your pocket. You keep them, you don’t have to repay them. You just got $10,000. Go, take advantage, apply, ok? Here is the link. You have to take advantage of it.

Here we put the link so that, when you finish the evaluation that is at the end of this presentation, we are going to pass on all this information, but you do have to apply now. Go to www.sba.gov and there you will find a way to find this EIDL program. And also, just so you know, the other link is www.covid19relief.sba.gov as well. Easy isn’t it? Write it down, write it down. It is very important that you write it down. There we share it in the chat for you to have it.

Mariette Martínez

I have two very important points, excuse me, before you follow, because there are two questions that are total, and I want to make sure you know it. The first question is your gross income, your gross revenue. You need to know how much revenue, not profit, revenue, you had. That is one question. 

The second question is what are your direct costs, cost of good sold, your direct costs. You need to know those two numbers because they are the only two accounting questions that are in this application.

Sean Salas

If you don’t know how many sales you had last year, I don’t know how it helps. But very good point Mariette, very well. Perfect, ok. Other frequently asked questions about this particular program, and then we are going to open the mic, so start lifting … 

Kenny, if you don’t mind, peer up the hands ‘cause we are going to give people the opportunity to raise their hands, but while they are raising their hands, I am going to answer other frequently asked questions. 

Is a guarantee requested? The answer is no. Can I apply for both programs? The answer is yes, I told you before, but you can’t use both programs to make payroll payments, ok? And another thing: if you get the EIDL and then the PPP, especially if you get it before April 3, you have to refinance the EIDL within the PPP and the $10,000 advance is deducted from the part that the loan is forgiven. Very important that you report this, ok? 

Can I apply if I only have ITIN? I already told you that’s a matter that bothers me… 

Kenny Salas

If I can clarify this point, because one thing I noticed with this presentation is: Sean, you have to take into account that there are people who have ITINs and have a very particular situation of immigration. So this is the advice that I’m going to give you, ok? 

The application is a website and there, below the application, there they say that you have to attest, that is to say specifically, that youI do not commit a certain XB whatever, and they are like 3 or 4 points. 

Based on your particular case, I recommend that you go to your lawyer or whomever is helping you with these types of issues, and show them: can I say yes to this? Yes, you can say yes to this, and they say “Don’t worry, I defend, you can”, you appy. But it is a particular case.

So technically, the rules don’t specifically say people with ITINs don’t qualify, that doesn’t exist. Yes, in fact you can apply, but you have to make sure that all those points can be validated and if it is a legal matter, validate it with your lawyer. That is the advice.

Sean Salas

Very good point Kenny, thanks for that.

Kenny Salas

And I have a question that has come up a lot and I don’t want to see them in front. So go, clarify me again. I pay all my employees with 1099. Clarify me, ones and for all… 

Mariette Martínez

Number one: I need to repeat what you said. You cannot pay employees with 1099, because an employee is paid by payroll or a contractor is paid by 1099. Please, friends, there are no, there are no employees paid by 1099. That does not exist anywhere in the United States.

Kenny Salas

I think that was clear and therefore when you do your payroll it can be zero because there is no payroll. People, let’s make this clear, please.

Sean Salas

Now, the follow up question for that is: but if I am an employee or someone who has a 1099, or income from a 1099, can I ask for the loan? The answer is yes, but the calculation is different for you.

Mariette Martínez

Yes, but very important Sean, again, because we want to educate our community. If you have a business and are only an owner, you are not an employee of your business. If you are a corporation and you become an employee, like Sean and Kenny who are employees of their corporation, they are owners and employees because they are paid on the payroll. Please, friends, that is very possible. 

All my colleagues are S Corporations or corporations and we put ourselves on the payroll because that reads: pay us reasonable compensation. If not, if you are SCC corporations, I know that there are many who are seeing this and they have not been paying in payroll, zero, zero. They have no payroll.

Kenny Salas

Perfect. Well, let’s start with Rocío Rodríguez. Right now we are going to give you permission Rocío and, please, push the unmute  button, that blue button. Perfect. Goodnight!

Rocío Rodríguez

Hello, good night.

Kenny Salas

Go ahead.

Rocío Rodríguez

Ok. My question is simple, I am a little nervous. I applied for this loan on March 30, they even gave me a confirmation, a confirmation number, but I have not received a response. So I’m nervous because I don’t know if I rated or didn’t rate or what’s going on. 

Sean Salas

Yes. March 30. Look Rocío, I’ve been very close to that. You are one of the people who were the first to apply, ok? So if you had said “I applied yesterday or two days ago”, Rocío I don’t know what to tell you. But I can tell you one thing. There is a line. And the last time they told me the number, I almost passed out. I was told that there was a waiting list of more than 500,000 people who had already applied.

Rocío Rodríguez

Wow!

Sean Salas

Then. The SBA, to be 100% honest, the SBA does not have the resources to process so many applications in a very short time. So even though they are saying two weeks, I don’t think there will be two weeks. 

That said, Rocío, that doesn’t mean that they will never process your application, ok? In other words, they are maintaining these applications. I hope they don’t get lost but right now who knows what’s going to happen, ok? But I hope not, ok?

And confidently, look, if you applied 30 and it is now 7… Give yourself at least another week until you start to worry. And with that said, I wouldn’t be surprised if it took up to a month for it to pass, ok? So, plan for that Rocío. Plan for that.

Kenny Salas

In these cases you have to plan for the worst and hope for the best, but you have to plan for the worst. And that’s what we have done at Camino Financial and many of our business partners and people are doing that. Thanks Rocío and have a good night. 

Rocío Rodríguez

Thank you very much for your reply. Goodnight.

Kenny Salas

We will continue with Ivette Galindo. Then we can give Ivette permission. Perfect. Ivette, how are you? Go ahead, good night.

Ivette Galindo

Hello, good evening, can you hear me?

Kenny Salas

We hear you perfect.

Ivette Galindo

You know I was a little confused. What about startups? I barely opened my business in January. So for me everything that happened was like a bucket of water. So what’s up? Because you were just saying to fill out the application by putting what you earned last year, ok. Of course, I have no way of checking it, it was not open or anything last year, but would it be like an important point to have that record, let’s say, last year?

Sean Salas

Ivette, just to clarify. You started this business this year and had income, did you generate income in January and February?

Ivette Galindo

Yes.

Sean Salas

Ok, perfect. Then apply for the PPP program. The PPP program does allow you, as long as you were in operations and with income before February 15, 2020, it is the date they put, ok? They are going to give you the opportunity to apply for that program.

Now, the calculation of the average payroll or your average expenses if you are sole proprietorship, instead of 2019 it will focus on the average of those expenses between January 1 and the end of February, I think. There it is in the presentation. So, calculations for you in particular are different, but it is allowed.

Ivette Galindo

Ah, ok. Thank you. Yes, I was a little confused and as I was saying, it was like I was just taking flight and everything stopped and I almost went crazy.

Sean Salas

No, don’t worry. You have to have faith, you have to keep moving forward. Thank you.

Ivette Galindo

Yes, thank you very much. Thanks for answering.

Mariette Martínez

Sean, Kenny, I want to make a point with what Ivette asked and I think that will also help everyone who is watching. If you have a month, two months or hopefully 12 months of income and expenses, this is also the point to go and do your accounting. 

I know Sean mentioned it, but I want to mention it again. This is the point of going and doing your accounting very fast and well done, because it is the only way that you are going to qualify and that you have numbers up to date. That is very important if you are thinking about it, and how you are going to do it too.

Sean Salas

Very well, perfect. Can we ask another question, Kenny?

Kenny Salas

Felipe Reyes. Please.

Sean Salas

Perfect. Felipe, go ahead. And remember, once they give you access, clic unmute, there. Perfect Felipe. How are you?

Felipe Reyes

Yes, well thank you, we are connected from Colorado, thank you. I formed my company last year with ITIN number and I just launched my company’s product in January and I ended or stopped operations because of the coronavirus, right? What is my option to access some benefit of this type?

Sean Salas

Yes, the answer is very similar. There is a particular date that we can gladly share in the follow-up that we are going to do with this program, but at the end of the day, as long as your business was formed before February 15, 2020, ok?

Now it may be that the income was partial in 2019 and there is a date where it’s said instead of calculating it in 2019, calculate it in the first two months of 2020. That said, of course, that artificially lowers the capacity of the loan, right? But there is such a calculation and we can gladly help you with that.

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