Missed or Denied a PPP Loan? Good News, Here Are Some Alternatives

The Paycheck Protection Program (PPP) loan is anticipated to quickly run through its second round of $310 billion in funding due to high demand, which will leave many small business owners wondering what to do. However, there are several alternative programs for small businesses that are worth exploring.

Economic Injury Disaster (EIDL) Loans

EIDL loans will fund up to $2 million for a term of up to 30 years for businesses that are experiencing hardship caused by the COVID-19 pandemic. These funds are intended to cover payroll and other operating expenses that the business could have otherwise met. The CARES Act supplemented the EIDL program with a forgivable EIDL advance of up to $10,000.

Main Street Lending Program

The Federal Reserve is establishing a Main Street Lending Program to support lending to small and medium-sized businesses that were in sound financial condition before COVID-19. U.S. businesses may be eligible for loans if they meet either of the following conditions:

  • Have 15,000 employees or less
  • Have 2019 revenues of $5 billion or less

Loans issued under the Program would have a four-year maturity, and principal and interest payments on the loans will be deferred for one year.

The Federal Reserve is currently working to create the infrastructure necessary to launch the program. Once the program is operational, small and medium-sized businesses will be able to apply for loans from an eligible lender.

7(a) and 504 Loans

The SBA 504 and the SBA 7(a) programs each offer unique benefits to businesses that qualify. Both can be used to help small business owners grow or maintain their business, however, each can be used differently.

The SBA 7(a) loan provides access to working capital and allows the borrower to purchase furniture and fixtures, make leasehold improvements, or acquire an existing business. The maximum loan for an SBA 7(a) loan amount is $5 million.

The SBA 504 loan allows the borrower to finance the purchase of land or existing buildings, make improvements to existing facilities, purchase equipment, or purchase ground-up construction commercial real estate. The 504 program is an economic development program aimed at promoting growth and job creation, so there may be a job creation requirement that is dependent on the amount of funds received. A 504 loan’s interest rate is fixed, and no outside collateral is required.

The Small Business Association (SBA) will pay 6 months of principal, interest, and associated fees owed for all current 7(a), 504, and Microloans, as well as, new loans disbursed before September 27, 2020. Borrowers do not need to apply for this assistance, it will be automatically provided.

Contact RJI CPAs

We can help. Please contact us with any questions you may have about PPP loans and if other alternatives may be appropriate for your business.