BUSINESSES IMPACTED BY COVID-19
“Courage is rightly esteemed the first of human qualities… because it is the quality which guarantees all others.”
– Winston Churchill
A Note From Our Team
We have been inundated with questions and requests regarding options provided by the federal government for small and medium sized businesses. SBA is a buzzing topic right now, but it’s been a focus and a core part of our business since inception. Our team has an in depth understanding of the policy and procedures and underwriting guidelines for SBA programs. We will be allocating as much time as possible to give advice to business owners.
While traditional credit feels to have tightened overnight, SBA 7(a) lenders are becoming increasingly creative and flexible in their support of small businesses. In addition to SBA 7(a), the widely discussed program in the media is the SBA Economic Injury Disaster Loan Program. The EIDL program is offered directly by the Small Business Administration versus SBA 7(a) loans offered through banks and non-bank SBA lenders.
We will be updating a FAQ section of this page on a daily basis. Please ask as many questions as possible so we can answer and post responses for others who might have similar questions.
SBA 7(a) Relief Program
The Small Business Task Force unveiled a $300B in Emergency Coronavirus Relief Package as part of the Keeping Workers Paid and Employed Act, Division A of the Coronavirus Aid, Relief, and Economic Security Act, includes:
- $300 billion in lending authority for SBA 7(a) loans
- 100% government-guarantees on SBA relief loans made through 12/31/20
- Up to $10MM in loan size, calculated by taking the average total monthly payments by the applicant for payroll, mortgage payments, rent payments, and payments on any other debt obligations incurred during the one-year period before the date on which the loan is made (except for applicants with seasonal employees, in which the payroll is based on the average total monthly payments for payroll from 3/1/19 through 6/30/19)
- Loan proceeds are only for payroll support including medical leave, costs related to health benefits, employee salaries, mortgage payments, rent, utilities, and any other debt payments incurred before the covered period. (These relief loans are not eligible for business acquisitions, real estate purchases, or other typical 7(a) loan proceeds).
- Available for currently eligible SBA borrowers AND not-for-profits
- Delegated (underwriting) authority will be made for SBA participating lenders to expedite loan processing
- Borrowers can get the SBA 7(a) loan OR an EIDL (direct SBA disaster loan), not both
- Borrower and lender guarantee fees will be waived
- Provides a “process” by which borrowers will be eligible for loan forgiveness in an amount equal to their payroll cost and costs related to debt obligations for the period between 3/1/20 and 6/30/20. The amount of forgiveness will be reduced proportionally by the number of employees laid off during this time, excluding employees making in excess of $100k in this calculation
MORE DETAILS WILL BE RELEASED IN THE HOURS/DAYS AHEAD
What can the funds be used for?
These working capital loans may be used to pay:
- Accounts payable
- Other bills that can’t be paid because of the disaster’s impact.
- Paid Sick Leave
- Supply Chain Disruptions
- Employee salaries
- Mortgage payments and other debt obligations
- Credit history – Applicants must have a credit history that is acceptable to the SBA. The SBA will take into consideration extenuating circumstances. If for example, the bad credit is recent and it’s caused by the COVID-19 pandemic the SBA will account for this.
- Repayment – As with a standard SBA loan, you will need proof about the business’ ability to repay the loan.
- Collateral – When applying for loans greater than $25,000, a business must provide collateral to secure the loan. The SBA requires borrowers to pledge what is available including personal real estate. Loans under $25,000 can be fully unsecured.
Important information to know while applying
- Include the disaster in your application – specifically name “COVID-19” or “Coronavirus”
- Do not rush through the application. Check and recheck the filing requirements to ensure that all the needed information is completed prior to submission. The biggest reason for delays in processing is due to missing information.
- Be sure to use the same contact information (business name and the name of all owners) that you use on your federal tax returns. Double-check that they match.
- If your tax returns reference other businesses that you own, you must also submit those tax returns in order to avoid a processing delay.
- If more funds are needed, applicants can submit supporting documents and a request for an increase. If less funds are needed, applicants can request a reduction in the loan amount.
- If the loan request is denied, the applicant will be given up to six months in which to provide new information and submit a written request for reconsideration.
- There is no cost to apply for the loan.
- If your loan is approved you are not obligated to accept the funds
Application Documents Required
- Completed Approval Package
- Contact our team for applicable forms
- Previous 3 years for the Applicant Business Entity and all Affiliate entities
- Form 940 for 2019,
- Form 941 for 4th Quarter 2019
- Payroll Summary Reports for March 2020 payroll run(s)
- Profit and Loss
- Balance Sheet
- Current A/R and A/P Aging Report
- Previous 3 Years for all owners with greater than or equal to 20%
- All owners with greater than or equal to 20%
Economic Injury Disaster Loan Information
*Direct information from sba.gov
The U.S. Small Business Administration (SBA) is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). U.S. Small Business. If you have suffered substantial economic injury and are one of the following types of businesses located in a declared disaster area, you may be eligible for an SBA Economic Injury Disaster Loan (EIDL):
- Small Business
- Small Agriculture Cooperative
- Most Private Nonprofit Organizations
Loan Amounts and Use
Substantial economic injury means the business is unable to meet its obligations and to pay its ordinary and necessary operating expenses. EIDLs provide the necessary working capital to help small businesses survive until normal operations resume after a disaster.
The SBA can provide up to $2 million to help meet financial obligations and operating expenses that could have been met had the disaster not occurred. Your loan amount will be based on your actual economic injury and your company’s financial needs, regardless of whether the business suffered any property damage.
Eligibility and Terms
The interest rate on EIDLs will not exceed 4 percent per year. The term of these loans will not exceed 30 years. The repayment term will be determined by your ability to repay the loan.
- EIDL assistance is available only to small businesses when SBA determines they are unable to obtain credit elsewhere.
- A business may qualify for both an EIDL and a physical disaster loan. The maximum combined loan amount is $2 million.
- The loans are not intended to replace lost sales or profits or for expansion.
Credit History and Repayment
- Applicants must have a credit history acceptable to SBA and is assessed in a case by case basis.
- SBA must determine that the applicant business has the ability to repay the SBA loan.
- Loan repayment is deferred until month 12 of the date of the promissory note.
- Economic Injury Disaster Loans over $25,000 require collateral.
- SBA takes real estate as collateral when it is available.
- SBA will not decline a loan for lack of collateral, but requires borrowers to pledge what is available.
Former EIDL Borrowers
The SBA announced changes to help borrowers still paying back SBA loans from previous disasters. All payments will automatically be deferred through December 31, 2020. Borrowers of business disaster loans do not have to contact SBA to request deferment.
Frequently Asked Questions
How can I determine if my business is eligible to apply?
The SBA’s Economic Injury Disaster Loans are available to all small businesses and most private non-profit organizations that have been directly affected by the disaster.
What are the SBA guidelines to determine what a small business is?
Generally, size standards vary by industry, and are based on the number of employees or the amount of annual receipts the business has. To see if your business qualifies as a small business, see the SBA’s definition of a small business here. Visit: https://www.sba.gov/document/support–table-size-standards
What types of businesses have been declared to be directly impacted by the COVID-19 disaster?
There are many businesses and industries that have been directly impacted by the current disaster. Right now all 50 States have been declared eligible for the EIDLs.
What kinds of small businesses can apply?
There are many businesses that can apply for an EIDL. Examples of eligible industries can include some of the following:
Retailers, Manufacturers, Restaurants, Owners of Rental Properties, Gift & Souvenir shops, Hotels, Recreation and Sport Facilities, and Wholesalers.
What are the collateral requirements of the Economic Injury Disaster Loans (EIDL)?
- Economic Injury Disaster Loans over $25,000 require collateral.
- SBA takes real estate as collateral when it is available.
- SBA may not decline a loan for lack of collateral, but will require borrowers to pledge what is available.
How are EIDL’s Different from Other SBA Loans?
SBA’s Economic Injury Disaster Loan (EIDLs) funds come directly from the U.S. Treasury. Contrary to a typical SBA loan application, an applicant does not have to go through a bank to apply. They can instead apply directly through the SBA’s Disaster Assistance Program at:
Are there Costs to apply for an Economic Injury Disaster Loan?
There is no cost to apply to apply for an EIDL.
If I’m approved for an Economic Injury Disaster Loan, do I have to take the loan?
There is no obligation to take the loan if it is offered by the program.
Are there any unsecured loan programs through the Economic Injury Disaster Loan?
You can get approval without the need for collateral to secure the loan if the maximum amount of money you’re looking for is less than $25,000.
If my company already has an SBA Disaster loan, can I still qualify for the EIDL due to the COVID-19 disruption?
Any applicant can have an existing SBA Disaster Loan and still qualify for an EIDL for the COVID-19 disaster. It’s important to note that the loans cannot be consolidated.
I currently have a regular SBA 7(a) loan. Does that allow me to still apply?
Yes, you can still apply for an EIDL as long as your business has been directly affected by the disaster.
Can I apply for an EIDL loan and also for an SBA 7(a) relief loan?
You can apply for both loans, however, you will not be able to obtain both loans and will have to choose either option.
Are there guarantee fees with applying for an SBA 7(a) relief loan?
Guarantee fees will being waived for this type of loan.
Once I’m approved and funded, are there restrictions on how can I use the loan funds?
The EIDL’s and the SBA 7(a) relief loans are set up to help businesses with the following expenses. The following are the expenses that must be paid with the loan funds:
Payroll, Accounts Payable, Rent, Mortgages, Fixed Debt Payments and Other bills that can’t be because of the disaster.
Can I use the EIDL as a way to replace lost profits or lost sales?
An EIDL is not meant as a stop gap or replacement of sales and profit nor can it be used as way to expand the business.
Are private Non-Profit companies eligible for an EIDL?
Most non-profit entities are eligible to apply.
What kinds of non-profits may apply?
Most typical kinds of non-profits that can apply are Educational Facilities, Senior Citizen Centers, Nursing Homes, Food Kitchens, Daycare Centers, Community Centers, and Shelters. There are a larger list of entities that can apply. To verify if your non-profit is eligible please visit:
What types of businesses are considered Ineligible Entities for an EIDL?
Agricultural Enterprises are not eligible if the primary activity of the business (including its affiliates) is as defined in Section 18(b) (1) of the Small Business Act, neither the business nor its affiliates are eligible for EIDL assistance. Please contact USDA or your local State for agriculture related assistance.
Other types of businesses not considered eligible include:
- Religious or Charitable Organizations
- Gambling related entities (Examples: casinos, poker parlors, racetracks)
Or Visit the Loan Relief Resources Available per State
Additional Resources for Local and State Help: