Since March 21, small businesses based in North Dakota that have been negatively impacted during the coronavirus pandemic have been able to apply for low-interest COVID-19 disaster loans through the Small Business Association (SBA). Eligibility is limited, and the funds can only be used to pay business bills or make payroll. Regardless of fact, for those small companies struggling to keep their head above water, the loans could be the difference between sinking and swimming. If you’re a small business owner dealing with the economic fallout from the crisis, here’s how to apply for a small business loan in North Dakota.
The Paycheck Protection Program
In response to the economic turmoil being created by the crisis, the government introduced a series of measures in March with the aim of providing cash relief to affected businesses. Of those measures, the Paycheck Protection Program (a low interest, fully forgivable loan scheme backed by the SBA) has been one of the most significant. Such was the initial response to the program, funds were exhausted within just three weeks. Thanks to a further $320 billion in funding received through April’s Paycheck Protection Program Increase Act, it’s now open to applications again. However, only a limited time remains to benefit; as it stands, the program will close at the end of June. If you want to avail yourself of the funds, getting your application in sooner rather than later is crucial.
Of the terms (more on which to come), the most appealing is the possibility to apply for full loan forgiveness. Note, however, that forgiveness isn’t guaranteed: if you apply for forgiveness via your lender (and by the way, the forgiveness will apply to any accrued interest as well as the loan principal), it will only be granted if you have used at least 75% of the loan funds towards payroll costs (the remainder can be used against other crucial costs such as business rent, mortgage interest repayments, utilities, and other fixed debts) and if you have maintained your payroll for at least 8 weeks past loan origination (so, for example, if you went into the program with 20 staff, you’ll need to have 20 staff still on your payroll at the end of the 8 weeks. They don’t necessarily have to be the same staff (if someone has quit of their own volition or if you’ve had to dismiss someone for conduct etc., you won’t be penalized if you replace them), but the headcount needs to be the same. The maximum amount of loan that can be borrowed is set at 2.5 times the average monthly payroll costs, up to a cap of $10 million. Other terms to note include:
- A fixed interest rate of 1%
- A loan term of up to 2 years
- Payment deferral for 6 months
- No SBA fees
- No collateral or personal guarantee needed
- No early re-payment penalties
Who Can Apply for the Paycheck Protection Program?
With loan forgiveness in the cards, the Paycheck Protection Program is understandably an attractive proposition. It’s not, however, a proposition that’s open to everyone. If you’re a small business owner in North Dakota hoping to apply, you’ll need to verify:
- Your business has been in operation since at least Jan 2020 and has suffered a financial impact as a result of COVID
- Your business meets SBA size standards (either according to the industry based size standard or the alternative size standard)
- You are a non-profit organization, veterans organization, or Tribal business concern with fewer than 500 employees. If over 500, you may still qualify if you meet the SBA industry size standard
- In addition to the above, you are also invited to apply if you are a sole proprietor, independent contractor, or self-employed person, with or without employees.
How Can I Apply for the Paycheck Protection Program in North Dakota?
If your business is based in North Dakota, you’ll need to file your PPP application directly with a local lender that’s been approved by the SBA to participate. This could be an existing SBA 7(a) lender, a federally insured depository institution, a federally insured credit union, or a Farm Credit System institution – if you need some assistance in finding a lender, the SBA’s Paycheck Protection Program lender search tool should help. If you’re planning on using a lender that’s proactively contacted you, don’t do anything before checking the SBA website to see if they’re approved. Several businesses have already lodged complaints after being scammed by fraudulent lenders – don’t let yours be one of them.
Once you’ve finalized your choice of lender, download the PPP borrower application form from the SBA website and submit the completed article, together with your payroll info, to the lender.
The Economic Injury Disaster Loan
In addition to the PPP, the SBA is also responsible for administering the Economic Injury Disaster Loan (EIDL), a low-interest loan that, like the PPP, is designed to support businesses struggling to meet crucial operating costs and payroll expenses. The EIDL can be applied for either in isolation or in conjunction with the PPP: if in conjunction, you’ll just have to make sure that you use the funds for different purposes (e.g., the PPP for payroll and the EIDL for operating costs).
While the EIDL doesn’t offer the possibility of full loan forgiveness in the same way as the PPP, it does offer successful applicants the opportunity to request up to $10,000 of the loan by way of a forgivable advance. Other terms to note include a fixed interest rate of 3.75%, terms of up to 30 years (depending on business need), and a maximum loan amount of $2 million.
Who Can Apply for the Economic Injury Disaster Loan?
Since the scheme began running low on funds, the SBA has closed applications to any businesses that aren’t engaged in agriculture. Eligible applicants will need to employ 500 or fewer employees and be primarily focused of the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural related industries (as defined by section 18(b) of the Small Business Act (15 U.S.C. 647(b)).
How Can I Apply for the Economic Injury Disaster Loan in North Dakota?
If you meet the eligibility criteria for the EIDL, apply directly via the SBA website (covid19relief.sba.gov). Expect to provide details relating to the business owners (if another entity owns a greater than 20% share), business activities, and payroll. Should you require any assistance in completing the application, you can reach out to a local Women’s Business Center, SBDC, or SCORE mentorship chapter, or contact the SBA Customer Service Center on (800) 659-2955 or email firstname.lastname@example.org.