Does Your Small Business Qualify For An ERC Loan?
The IRS pause on ERC claims is leaving many small businesses searching for alternatives. Learn if an ERC loan is the right fit for you.
After the IRS instituted a pause on processing Employee Retention Tax Credit (ERC) claims on September 14, 2023, the issuing of ERC refunds to small businesses screeched to a halt. If the ERC pause left your business high and dry after submitting your ERC claim, an ERC loan might be the perfect option for quick funds.
Learn more about what an ERC loan is, who qualifies for one, and how you can apply for one.
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Who Qualifies For An ERC Loan?
If you have claimed an ERC refund, your small business could be eligible for an ERC loan.
Some key factors will determine whether or not your business is eligible for an ERC loan:
- Your ERC claim status with the IRS
- The amount of the ERC claim
Fortunately for small businesses that may have trouble getting a traditional business loan, these might be the only things that lenders consider before issuing an ERC loan.
However, some lenders may also consider your:
- FICO score
- Credit report
- Business revenue
Loan requirement factors vary depending on the lender, so be sure to do your research before deciding whether or not you qualify with a particular company. And if a deal looks too good to be true, it’s worth digging a little deeper to see if you might be the victim of an ERC scam.
What Is An ERC Loan?
An ERC loan is an advanced payment for your pending ERC refund. If your business can’t wait 12+ months for a check from the IRS, an ERC loan can help.
Repayment on your ERC loan will begin once your ERC refund is disbursed.
Here are some common terms you may encounter when you’re looking to learn more about ERC loans.
- ERC Funding: This term is used to refer to both ERC loans and advances. Unfortunately, it’s also used to describe the ERC tax credit program as a whole, which can make things more confusing than they need to be.
- ERC Loan Fees: While some lenders aren’t transparent with their fees, you can typically request a free consultation, and there are no fees to apply for an ERC loan.
- ERC Fees: These are fees that will be paid to a CPA, tax expert, ERC specialist, or other expert who files an ERC claim on your behalf. You can avoid these fees by filing Form 941-X on your own.
- ERC Grants: This is a misnomer, there is no such thing as an ERC grant, but the ERC program is sometimes referred to as a grant because it’s “free money.”
- ERC Refund: A refundable tax credit that does not need to be repaid, even better than a grant for small businesses.
If you want to work with an ERC expert to file your ERC claim to make sure that the process is done correctly and avoid any future delays with your refund, check out the best ERC specialists to learn more.
How Do I Apply For An ERC Loan?
The application process for an ERC loan will vary depending on the lender you choose, but, in general, you will need to take the following steps to apply for an ERC loan:
- File: Either on your own or using an ERC specialist, file your ERC claim with the IRS.
- Research: Look into companies that offer ERC loans and advances.
- Submit: Gather basic information about you and your business for a free ERC loan analysis/consultation.
- Provide: Some lenders will need additional documentation and information to determine if you qualify for an ERC loan.
- Receive: Get your loan decision from your chosen lender.
- Review: Look over your loan contract carefully for your payment terms, fees, and interest rates before you sign anything.
- Receive: Congratulations! You’ll now receive the ERC loan funds in your business bank account soon.
As we said, the application process will vary by lender, as will the general timeline, interest rates, fees, repayment schedules, and other details.
Learn more about the ERC loan application process in our guide to applying for ERC loans. And if you’re ready to take the next step and apply for an ERC loan, read out about our top choices for ERC loans.