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How your small business can still cash in on the government's $670 billion relief program so you can quickly pay rent, keep staff employed, and restructure your debt

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  • The federal government's disaster relief program provides loans and grants through two avenues: The Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
  • PPP offers up to $10 million to employers and independent contractors who retain workers during the disruption caused by the coronavirus pandemic. 
  • Most applications for EIDL are temporarily closed due to high demand, but small businesses can still apply for an emergency advance of up to $10,000 or a bridge loan of up to $25,000.
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The federal government's CARES disaster relief program (the Coronavirus Aid, Relief, and Economic Security Act) provides two distinct avenues through which small business owners can access billions in loans and grants: The Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).
In addition to funding $670 billion for PPP to keep employees on company payrolls, CARES allocates another $10 billion to the existing EIDL program, which is meant to relieve businesses during economic disasters. This is the first time in the 60-year history of this loan program that a pandemic has been included as a disaster.
While the two programs have different features and funding limitations, both provide pathways for forgiveness, meaning the loans could turn into grants for companies that either maintain employees or restore payroll when it's safe to return to work.
The following information is based on Business Insider's review of the legislation, guidance from the Small Business Administration and Chamber of Commerce, as well as a leaked FAQ document from Senate Democrats. Here's what you need to know about these two programs.

The Paycheck Protection Program

Loans up to $10 million are available to support small business employers and independent contractors who retain workers during the disruption caused by the coronavirus pandemic.
Funds may be used for salaries, wages, and tips, as well as benefits like healthcare, retirement, paid time off, and to pay certain taxes. Additional uses include mortgage or rent payments, utilities, and interest on preexisting debt.
Borrowers can apply for forgiveness of up to eight weeks of qualifying expenses off of the principal, which effectively converts the loan into a grant. Changes from the Treasury on Thursday, April 2, said only 25% of nonpayroll expenses would be forgiven, instead of the 100% originally promised.
Who's eligible: Small businesses, non-profits, independent contractors, freelancers/self-employed, and limited types of franchise affiliates that have been in business since January 31, 2020
A small business by SBA standards is generally defined as having 500 or fewer employees. For the first time ever, the CARES Act expands this definition to a sole proprietorship, an independent contractor, tribal business, cooperatives, and ESOPs. If you aren't sure where you fall, read our guide on what it means to be a small business.
Requirements: Actual financing amounts are calculated by taking your previous year's average monthly payroll cost, and multiplying by 2.5. Loans cap at $10 million for a business and $100,000 for a sole proprietor or independent contractor. 75% of funds must be used on payroll, and only 25% of funds used for other purposes will be forgiven.
How to apply: Prepare a PPP application and contact your local bank, credit union, community development finance institution (CDFI), or other SBA-qualified lender.
Expected timeline: Applications opened on April 3, though not all banks and SBA-qualified lenders rolled out their programs right away. The Treasury encourages applicants to move quickly due to the cap on available funding.

Economic Injury Disaster Loans

Most applications for the SBA's Economic Injury Disaster Loans (EIDL) related to COVID-19 are temporarily on hold, according to the SBA.
"At this time, only agricultural business applications will be accepted due to limitations in funding availability and the unprecedented submission of applications already received," its website reads.
Instead, the SBA is offering either an emergency advance or an express bridge loan, detailed below.
Who's eligible: Small businesses, non-profits, independent contractors, freelancers/self-employed, and limited types of franchise affiliates that have been in business since January 31, 2020
Requirements: Applicants will need to submit their credit score. There are no application fees, nor a prerequisite that you must be unable to receive funding elsewhere.
How to apply: Fill out the application at covid19relief.sba.gov. It should take roughly 30 to 50 minutes to complete. 
Expected timeline: TBD. These loans are in high demand, so it could take weeks to process your application.

Immediate EIDL grants up to $10,000

Businesses applying to an EIDL are also eligible to receive an immediate cash advance up to $10,000. These grants are an option within the EIDL and business owners may receive them even if they are not approved for further funding. Grants will be available through December 30, 2020.
The US government leaves the spending of this money up to businesses' discretion, but encourages companies to use it to maintain payroll and train employees.
Who's eligible: If you are eligible to apply for an EIDL, you are eligible for this grant.
How to apply: Within the EIDL application, there will be a prompt to indicate that you would like to be considered for a cash advance.
Expected timeline: Businesses should expect to receive their grant within three business days after applying for an EIDL.

Express Bridge Loans

If you already have a relationship with an approved SBA lender, you could access a rapid loan of up to $25,000 ahead of an EIDL.
The maximum terms are 7 years and an interest rate of 6.5% over the prime rate (Currently around 3.25%).
Who's eligible: If you are applying for an EIDL, and you cannot get credit elsewhere, you are eligible for this grant.
How to apply: If you have and established relationship with an approved SBA lender, apply through them.
Expected timeline: Businesses should expect to receive funding within 45 days of submitting an application.

This post will be updated with additional details as they develop.
Kimberly Leonard contributed reporting to this story.
MUST READ: America's small business owners hoped a $349 billion lifeline from Washington would pull them through the pandemic. Here's the inside story of how its launch spectacularly unraveled in 24 hours.
SEE ALSO: 6 steps entrepreneurs need to take right now to make the most of the $349 billion in emergency funds the government is about to start handing out
MUST READ: Small business owners can get either loans or payroll relief from the $2 trillion coronavirus stimulus bill, but not both. Here's how to decide which is better for you.
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