Part of the CARES Act for small businesses is a loan of 250% your average monthly payroll. You can get the loan from a bank that is 100% guaranteed from the government. Your business must be operating before February 15, 2020 to be eligible. As long as you use the loan towards qualified expenses, maintain your company’s headcount and salary levels, it can be forgiven (you don’t have to pay it back!). This is an amazing option for all companies. This is particularly useful for venture backed companies because it does not require a personal guarantee. It is important to note that you cannot have both a PPP and EIDL loan for the same purpose. We cover the PPP loan option in detail HERE and review the EIDL loan below.
We are waiting for guidance from the SBA on how the SBA affiliation test of ownership will impact startups with venture-backed owners. These startups may be grouped with the other VC’s holdings, giving them an aggregate size too large to qualify for the SBA funding. The current best breakdown of guidance is HERE.