Applying for a $500,000 loan has never been so easy.
That’s how Michael Rogers sums up his experience applying and getting an Economic Injury Disaster Loan (EIDL) from the Small Business Administration. The online application took less than three hours to fill out and, two weeks later, he was approved.
“It’s literally the easiest loan I’ve ever received,” said Rogers, owner of Beeline Charters and Tours in Seattle. “It’s really a simple application process.”
He shared his positive experience during the UMA Town Hall session on April 2, which offered tips about applying for both the EIDL and the Paycheck Protection Program (PPP) loans, part of the $2.2 trillion stimulus package.
Related: See April 4, 2020 article on What you need to know about PPP and EIDL
Early application
Rogers applied March 16, the first day the application was available in Washington. On the 30th, he received a follow-up email from his loan specialist, who had about a dozen questions for him. Fortunately, he could respond by email and didn’t need to log back onto the SBA website or upload more documents.
“Washington was a little bit ahead of the curve on this whole thing because our state was declared a disaster area pretty early, and that opened up the application process for me,” Rogers said.
He asked for $600,000 but lowered the amount to $500,000 at the recommendation of the loan specialist to expedite the loan. Loans are capped at $2 million. That conversation took place at breakfast time and, by lunchtime, she called back to say he was approved and the funds would be released in 10 to 14 days.
Rogers was astonished at the speed of the process and how little documentation was needed to secure the funding.
“It was pretty phenomenal,” Rogers said. “The ease of the application process and speed at which my loan was approved was some rare good news, I’m not sure if I got lucky or if this will be true for everyone who applies. Only time will tell.”
Terms of loan
The terms were 30 years at a 3.75% rate, which gave him low payments. He hopes to pay it off early. The first payment is deferred for 12 months, which gives him some breathing room.
His business, launched in 1996 to provide daily shuttle service to local ski resorts, has grown to a fleet of more than 30 vehicles, employing more than 50 full- and part-time personnel.
The loan is secured by business assets and requires the borrower to be a personal guarantor, which is standard with most loans. The application process included a review of his business assets, such as equipment and accounts receivables. He wasn’t asked for a balance sheet.
“I was pretty shocked by that, but maybe they were in a hurry to get the money out the door. They did look at our tax returns,” Rogers said. “They thought that was sufficient enough to guarantee a loan. It went with very minimal paperwork and, for the federal government, that was surprising.”
Remember, it’s a loan
He didn’t apply for the immediate $10,000, which required checking a box, because he had a very good cash flow at the time. The money gets wrapped into the loan, but if the loan is denied, the applicant gets to keep the initial allocation.
“I think it’s important to remember this is a loan, and you have to pay it back. So we’re going to use it sparingly and kind of as a line of credit to cover expenses that, if we don’t have the cash flow to cover, then we’ll tap into this,” Rogers said.
His strategy is to use the funds to pay expenses, loans or costs necessary to keep the family business afloat until sales pick up again.
Applying for PPP loan
Rogers is still planning to apply for a PPP loan, available through lenders. The funds are intended to encourage small businesses to rehire furloughed full- and part-time workers and put them back on the payroll through June 30.
Businesses can borrow up to $10 million in loans that are 100% forgivable if they do not lay off any employees or if they rehire employees they’ve already laid off.
“I’m still trying to figure out how that could work with unemployment,” Rogers said. “Can employees receive all their unemployment benefits first and then kick in the PPP, or is it an either/or situation?”
Launched on April 3, the PPP program initially got off to a rocky start because banks said they weren’t ready for the rollout.
For an update on the loan process and other stimulus issues, join UMA for the next online Town Hall meeting this Thursday at 2 p.m. ET on the Zoom platform to discuss the most current issues that matter to operators.
