How to Apply for a Small Business Loan in Michigan

Michigan

According to ThoughtCo, small businesses make up around 99% of all independent enterprises in the country, dominating the US market and accounting for around 52 percent of the workforce – which makes the current situation being faced by small businesses all the more worrying. A small company in trouble doesn’t just spell trouble for the business – it spells trouble for every single employee who works for it. And with the US unemployment rate now standing at over 20%, the one thing we can’t afford is any more lost jobs. Michigan has almost a million small businesses to its name, and like many other businesses across the US right now, a lot of them are struggling to keep afloat. After all, COVID-19 isn’t just having a devastating effect on people’s health, it’s crippling the economy. In response to the situation, two new small business loans have been introduced through the SBA. Designed to give a cash injection to small companies suffering a short-term loss of revenue as a result of the crisis, the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) could prove a lifeline to companies struggling to keep up with costs. If you’re in need of financial support, here’s how to apply for a small business loan in Michigan.

What Is The Paycheck Protection Program?

Designed to provide companies with a quick source of cash, the PPP is intended to support exclusively with workforce expenses (including commission, wages, holiday pay, severance, retirement benefits and medical pay) and operation costs (including mortgage interest payments, utilities, rent, and fixed debts). In terms of the maximum amount that can be requested, loans under the PPP are capped at 2 and a half times your average monthly payroll costs, or up to a maximum of $10 million. If your business…

  • … was in operation between Feb 15 – Jun 30, 2019, you can apply for a loan up to 250 percent of the median monthly payroll costs for the same period.
  • … was not in operation between Feb 15 – Jun 30, 2019, you can apply for a loan up to 250 percent of the median monthly payroll costs between Jan 1 and Feb 29, 2020.

Chief terms of the loan to note include:

  • A 2-year term
  • No SBA fees or prepayment fees
  • A 1% fixed interest rate
  • Automatic loan payment deferral for 6 months (although note that interest will begin accruing from loan origination)

Providing at least 75% of the loan funds are used towards keeping your current workforce for at least 8 weeks (with the remainder to be used against operating costs), the loan will be fully forgiven. The application process is smooth enough, and certainly far easier than for most loans. However, eligibility is limited, so be sure to check your status before beginning your application.

What Are The Eligibility Requirements For The Paycheck Protection Program?

If your company launched prior Jan 31, 2020, and ticks the boxes on the following requirements, you’re eligible to apply for the PPP.

  • It employs 0-499 workers
  • It employs 500+ workers but meets the criteria for ‘small business’ as per the SBA Size Standards
  • It is registered 501 Veteran organization, a private non -profit, an employee-owned cooperative, or a tribal business

Additionally, as per the dictates of the SBA, it’ll need to meet the following requirements:

  • Be organized for profit
  • Be independently owned and operated
  • Have a place of operation in the United States
  • Operate primarily within the United States
  • Not dominate in its field on a national basis

How Can I Apply For The Paycheck Protection Program?

All applications for the PPP are to be made via an approved SBA 7(a) lender, a Farm Credit System institution, a federally insured depository institution, or a federally insured credit union. A full list of approved lenders can be found at sba.gov. Once you’ve decided on your preferred lender, download a copy of the PPP borrower application form from the SBA website and submit, along with the required documents, to the lender.

What Is The Economic Injury Disaster Loan (EIDL)?

The Economic Injury Disaster Loan aims to support small companies that are experiencing a short term revenue loss as a result of COVID-19 by providing working capital loans of up to $2 million. Similar to the PPP, the EIDL is intended to help with expenses such as compensation, salaries, healthcare, and retirement benefits, along with mortgage payments, rent, utilities, and fixed debts.

Chief terms to note include:

  • No personal guarantee is needed on anything up to $200,000
  • A credit check and review of tax records will be completed during the application review
  • The usual SBA requirement to show an inability to obtain credit elsewhere is waived
  • No collateral required on anything up to $25,000
  • A fixed interest rate of 3.75%
  • 30-year repayment terms
  • A forgivable advance of up to $10,000 can be requested, to be paid upfront within 3 days of approval

What Are The Eligibility Requirements For The Economic Injury Disaster Loan?

Eligibility for the EIDL is determined by much the same criteria as the PPP, namely:

  • Companies should employee 0-499 workers or meet the criteria for ‘small business’ as per the SBA Size Standards
  • Be a registered 501 Veteran organization, an employee-owned cooperative, a private non -profit, or a tribal business
  • Be organized for profit
  • Have a place of operation in the United States
  • Operate primarily within the United States
  • Be independently owned and run
  • Not dominate in its field on a national basis

How Can I Apply For An Economic Injury Disaster Loan?

All EIDL applications should be filed at the SBA website. The application process has been simplified, but if any assistance is needed, the SBA recommends reaching out to your local Women’s Business Center, SBDC, or SCORE mentorship chapter. A full directory of centers in Michigan can be found at this site.

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