Applying for a $500,000 loan has never been easier.
This is how Michael Rogers sums up his experience applying for and obtaining an Economic Disaster Disaster Loan (EIDL) from the Small Business Administration. The online application took less than three hours to complete, and two weeks later it was approved.
“This is literally the easiest loan I’ve ever received,” said Rogers, owner of Beeline Charters and Tours in Seattle. “It really is a simple application process.”
He shared his positive experience during the AMU Town Hall on April 2which offered advice on how to apply for both EIDL loans and the Paycheck Protection Program (PPP), as part of the $2.2 trillion stimulus package.
Rogers applied on 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 a dozen questions for him. Luckily, he was able to respond via email and didn’t need to log back into the SBA website or upload any other documents.
“Washington was a little ahead of all of this because our state was declared a disaster area pretty early on, and that opened up the application process for me,” Rogers said.
He requested $600,000 but lowered the amount to $500,000 on the recommendation of the loan specialist to expedite the loan. Loans are capped at $2 million. This conversation was over breakfast time and at lunch time she called back to say it was approved and funds would be released in 10-14 days.
Rogers was amazed at the speed of the process and the little documentation needed to secure the financing.
“It was pretty phenomenal,” Rogers said. “The ease of the application process and the speed with which my loan was approved was rare good news, I don’t know if I was lucky or if this will be true for everyone who applies. Only time will we will tell.
The terms were 30 years at a rate of 3.75%, which gave him low payments. He hopes to pay it back sooner. The first payment is deferred for 12 months, which gives him some breathing space.
His business, launched in 1996 to provide a daily shuttle service to local ski resorts, has grown to a fleet of over 30 vehicles, employing over 50 full-time and part-time staff.
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 receivable. He was not asked for a report.
“I was pretty shocked by that, but maybe they were in a rush to get the money out. They looked at our tax returns,” Rogers said. “They thought that was enough to secure a loan. It was done with a minimum of paperwork and, for the federal government, it was surprising.
Remember, it’s a loan
He didn’t ask for the immediate $10,000, which required checking a box, because he had very good cash flow at the time. The money is included in the loan, but if the loan is refused, the applicant keeps the original allocation.
“I think it’s important to remember that this is a loan and you have to pay it back. So we’re going to use it sparingly and kind of like a line of credit to cover expenses that, if we don’t have the cash, we’ll dip into it,” Rogers said.
His strategy is to use the funds to pay for expenses, loans, or fees needed to keep the family business afloat until sales pick up.
Apply for a PPP Loan
Rogers is still considering applying for a PPP loan, available from lenders. The funds are intended to encourage small businesses to rehire furloughed full-time and part-time workers and put them back on the payroll until June 30.
Companies can borrow up to $10 million in 100% repayable loans if they don’t lay off any employees or if they rehire employees they’ve already laid off.
“I’m still trying to figure out how it might work with unemployment,” Rogers said. “Can employees get all their unemployment benefits first and then start the PPP, or is it one or the other?”
Launched on April 3, the PPP program initially got off to a rocky start as banks said they were not ready for rollout.
For an update on the loan process and other stimulus issues, join WBU for the next Online Town Hall this Thursday at 2 p.m. ET on the Zoom platform to discuss the most current issues that matter to operators.