In this post we will provide a few tips that we have learned about how to apply for an Economic Injury Disaster Loan (EIDL) offered through the Small Business Association (SBA). This option is available to every small businesses including fly fishing lodges, fly shops and independent contractor fishing guides. Every fly shop, fishing guide and lodge should consider applying for the EIDL loan as soon as possible before funding runs out!
One of the hardest hit areas of the US economy during the COVID-19 pandemic has been the tourism industry. Many fly fishing businesses and fishing guides (Montana Angler included) are scrambling to develop a game plan for surviving the economic consequences of the pandemic. Like every other small business impacted by COVID-19 we have been investigating many of the new financial resources that are available with the CARES Act (stimulus package) as well as other options. We have been doing some research on several of the new programs. While we are better at providing fly recommendations vs. financial recommendations, we thought we would share what we have learned about the EIDL loan program as it may help your fishing business in these challenging times.
***IMPORTANT NOTE: If you are an employee fishing guide that has lost trips due to COVID-19 ,the EIDL loans are NOT an option. There are, however, new unemployment benefits as part of the CARES Act for employee fishing guides that have lost work during the pandemic.
What is the EIDL loan program?
The Economic Injury Disaster Loan program is not new, but there are some new wrinkles as a result of COVID-19. The program allows small businesses to apply for a low interest (currently 3.75% loan) in response to an economic disaster such as the current pandemic. We first applied for the EIDL shortly after Montana declared a state of emergency. The full application is very lengthy and requires significant financial details, bank records, tax returns, etc.
In response to the pandemic, the initial application has been dramatically streamlined. This also allows for up to a quick $10,000 advance on the loan. Furthermore, even if you do not follow up on the larger loan - you can keep the advance. As part of the CARES ACT this can also be forgivable (so it is really more like a grant) if you use it for things like payroll (including paying yourself if you are a independent contractor fishing guide), rent, mortgages and utilities.
Is the EIDL time sensitive?
Yes! The CARES act carved out $350 Billion for small businesses. The catch is there are LOTS of small businesses out there. So the $350 Billion is not nearly enough to cover the demand in applications for the EIDL program or the new Paycheck Protection Program (another loan/grant option). It is possible the feds will release more money into the program, but for now the faster you can apply for the EIDL the higher the odds you will get some funding from it before the money runs out.
Timeline for EIDL loan and advances - expect delays
The advance is supposed to occur in as fast as 3 days, although this is highly unlikely based on the massive demand. With the massive swell in demand and the logistics of dispersing funds this is highly unlikely. Keep in mind that $10,000 is the maximum advance you may receive. We have heard through the grapevine that it is based on how many employees you have and you need 10 employees to get the full advance. There is not clear guidance from the SBA yet on how much of the maximum $10,000 advance you may receive. Also, it appears that the system is very, very overloaded at the moment. We applied for the EIDL on the original loan platform in mid March and then the new streamlined portal a week later and haven't heard back. So no one really knows how long this will take. For more than $10,000 (beyond the advance) a longer application will be required and you will work with an SBA lender. A few weeks ago this loan process was online and it took several hours to complete and required extensive financial data. That has now been replaced with the streamlined application. We have been told that if you want to apply for more than $10K that you will then complete a longer application directly with an SBA lender at a later date. So for now everyone should at a minimum apply for the advance (again the advance is more like a grant!).
Is the EIDL to good to be true?
Time will tell. There is overwhelming demand for this program. The system is getting crushed with applications. There is also not enough money in the CARES Act to fund all of the demand. So it is likely that a lot of folks will not get the funding they ask for or need unless more money is added to the system with future stimulus packages. Either way, it only takes about 10-15 minutes to complete the application so it is worth a shot.
How to find the EIDL application?
Here is the link for the EIDL application. You will need to know your previous year's revenues or independent contractor earnings from guiding:
Step 1: How to fill out the Disclosures section of the EIDL application:
On the first page of the application if you are a lodge, fly shop or larger outfitter with employees choose the first button: Applicant is a business with not more than 500 employees. IF you are a smaller outfitter that does not have employees or an independent contractor fishing guide then choose the second button (if you are an outfitter that highers other independent contractor guides you still choose the independent contractor option). Check all of the boxes at the bottom. The screen shot below would be how most fishing guides would complete the form:
Part 2a: Top half of the Business Information section of EIDL application
In the next section of the application there are some odd questions half way down. For the revenues section report your 12 month revenues prior to January 31, 2020. For most fly fishing guides this will be your 2019 total earnings (the sum of all of your 1099 pay while guiding as a contractor). For lodges and fly shops, you can run a report in your accounting software such as Quickbooks with custom dates
For "cost of goods sold" leave this blank if you are a fishing guide or lodge that does not have a retail component.
For fly shops or lodges with a retail shop your cost of goods sold would be your wholesale cost of all inventory brought in during the same 12 month period THAT HAS SOLD (NOT the cost of product still in inventory).
The rest of the questions can be left blank as they only apply to non-profits and faith based organizations.
Part 2b: Bottom half of the business information request in the EIDL
Most of this section is self explanatory. For "Business Activity" there is not a great choice that matches fly fishing businesses. Lodges could choose the Hotel and lodge option. For guides Miscellaneous Services would work. In the end it is important to just get the application in even if it is not perfect.
For Number of Employees list "1" if you are a fishing guide to count yourself.
Part 3: Business Owner Information
This section is self explanatory
Part 4: Additional Info
See the screen shot below for guidance on completing the final page of the application. Make sure to have your banking information such as routing number and account number handy.
Finished!!! Now cross your fingers and hope there is some money left. If you apply for the EIDL and are awarded the advance, and ALSO apply for the Paycheck Protection Program loan, the amount you are awarded from the EIDL advance will be subtracted from the PPP loan. We did read on one banking blog that if you have less than 10 employees you may not receive the full $10K. Again there is a lot still being worked out on this program so there will likely be delays, changes, etc moving forward. For as easy as the EIDL loan advance application is to complete, it is something every fly fishing business should consider doing.