What Are SBA Loans? How Are They Beneficial?

Posted by finway on April 6th, 2021

Small businesses face various difficulties in surviving in the market. These difficulties include financial crisis, competition, and market share. But the financial crisis is the major problem faced by a small business. Sometimes a small business can not pass the business loan eligibility, which can worsen the business conditions. But for the rescue, Small Business Administration loans are available in the market. However, most of the small businesses are not aware of the SBA loans. Here are the details of SBA loans:

SBA Loans

Small Business Administration (SBA) loans are low-interest long terms loans that are available for business owners. If a business owner is suffering from disaster-related physical or economic damage or wants to grow his business, he can apply for an SBA loan.

Consolidated Appropriations Act 2021 and American Rescue Plan Act 2021

Consolidated Appropriations Act 2021 and American Rescue Plan Act 2021 are the two laws passed by Congress to provide additional funding. These two government loan programs change the rules for several government programs. It includes Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL).

Paycheck Protection Program (PPP)

Paycheck Protection Program (PPP) is a program that CARES Act formulated in March 2020. It provides forgivable SBA emergency loans to small businesses. As per this program, an SBA emergency loan can be provided up to $ 10 million.

Following entities can claim loan under this program:

1. Small businesses with 500 or fewer employees

2. Sole proprietorships

3. Independent contractors

4. Self-employed persons affected by the COVID-19 outbreak.

This legislation provides a loan of up to $ 10 million to the qualifying companies with 500 or fewer employees. It also provides second-draw loans to the previous borrowers with 300 or fewer employees. On returning the full or part-payment of the PPP loan, you can reapply for this loan.

Economic Injury Disaster Loan (EIDL)

The Economic Injury Disaster Loan (EIDL) loan limit is increased to $ 500000 for 24 months of economic injury. Also, the businesses that got the loan under lower limits are eligible for increasing their loan amount.

Economic Injury Disaster Loan Targeting Advances

Economic Injury Disaster Loan Targeting Advances is the rectification of the EIDL Advances. As per EIDL Advances, a small business can get an advance of $ 10000 as part of the loan application process. However, this advance will then be deducted from the total loan eligibility. But in July 2020, this program ended due to a shortage of funds. Now, as per Economic Injury Disaster Loan Targeting Advances, all the previous applicants will get an allocation of $ 10000.

Other SBA Programs

Other than these two SBA programs, additional programs include Loan Deferrals, Express Bridge Loans, 7 (a) Debt Relief Loans, and several other programs.

Conclusion

SBA loans are rescue loans that provide loans to small businesses when they do not get loans from any other government program. To get an SBA loan, you can visit their website and refer to business loan online apply.