SBA Disaster Assistance Loans in Response to Coronavirus - Available to Small Businesses & Non-ProfitsMarch 16, 2020
SBA Disaster Assistance in Response to the Coronavirus - Loans available for small businesses and private non-profits
VIEW a comprehensive easy to read GUIDE to understanding the CARES Act and various assistance options HERE!
*NOTE - Please contact our local Small Business Development Center for assistance with preparing financial documentation, completing forms, etc. Regional Director Bill Leaverton can also help with preparing business plans and suggesting additional resources available for your specific situation. Find contact information HERE.
•The U.S. Small Business Administration 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). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
•Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available to small businesses and private, non-profit organizations in designated areas of a state or territory to help alleviate economic injury caused by the Coronavirus (COVID-19).
•SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
•Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities as well as updated on our website: SBA.gov/disaster.
•SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance per small business and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
•These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
•SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
•SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.
•For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail email@example.com.
Applicants are encouraged to apply online using the Electronic Loan Application (ELA) via SBA’s secure website at https://disasterloan.sba.gov/ela
Paper loan applications can be downloaded from www.sba.gov/disaster
Note: Although a paper application and forms are acceptable, filing electronically is easier, faster and more accurate; Completed paper applications should be mailed to:
U.S. Small Business Administration
Processing and Disbursement Center
14925 Kingsport Road
Fort Worth, TX 76155
Disaster loan information and application forms may also be obtained by calling the SBA’s Customer Service Center at 800-659-2955 /(800-877-8339 for the deaf and hard-of-hearing) or by sending an email to firstname.lastname@example.org
EIDL Filing Requirements
1. Electronic Loan Application (SBA Form 5)
2. Electronic Loan Application (SBA Form 5C) – Sole Proprietorship Only
3. Tax Authorization (IRS Form 4506-T) 20% Owners/GP/50% Affiliate
4. Most recent 3 Years of Business Tax Return(s)
5. Personal Financial Statement (SBA Form 413) 20% Owners/GP
6. Schedule of Liabilities (SBA Form 2202)
7. Other information that may be requested:
a) Complete copy, including all schedules, of the most recent Federal income tax return for principals, general partners or managing member, and affiliates (see filing requirements for more information).
b) If the most recent Federal income tax return has not been filed, a year-end profit-and-loss statement and balance sheet for that tax year
c) A current year-to-date profit-and-loss statement
d) Additional Filing Requirements (SBA Form 1368) providing monthly sales figures.
Enhancements to EIDL loan program as a result of legislation passed March 27, 2020
(The original EIDL legislation was enacted on March 17, 2020)
- EIDL applicants will receive a $10,000 emergency grant at application date.
- Small business can qualify if they have been in business less than one year. Must have been in business on January 31, 2020.
- If the EIDL loan is approved, the $10,000 will reduce the loan proceeds at funding date.
- REPAYMENT: An applicant shall not be required to repay any amounts of an advance provided, even if subsequently denied an EIDL loan.
- If business subsequently receives funding for PPP 7(a) loan, loan forgiveness reduced by $10,000
- Private nonprofits are eligible for EIDL loans, too!!
CARES ACT (PPP LOAN)
SBA 7(a) relief loan provisions, pursuant to legislation signed March 27, 2020:
The “Small Business Administration Business Loans Program Account, CARES Act” (aka PPP Paycheck Protection Program) funds loans under enhanced SBA 7(a) relief loan provisions:
1) Funding of $349 billion available and funded through banks and other qualified lenders
2) SBA small business is <500 employees. Includes contractors, sole proprietors, 1099-NEC recipients
3) 501(c)(3) nonprofits qualify
4) Business operational before February 15, 2020, and paid salaries, payroll taxes, or had SE earnings
5) Business that, as a result of Covid 19, had issues with supply chain, shortages, shipping, staff challenges, decrease in receipts, or closure
6) Borrower must make good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19
7) Loans up to $10 million, loan amount tied to average monthly payroll costs for one year prior to loan date multiplied by 2.5.
8) Covered defined as period beginning February 15, 2020 and ends June 30, 2020
9) Payroll cost includes salary, wages, leave pay, group health, retirement, state payroll tax, net SE income. Payroll cost is limited to $100,000 per employee.
10) Applicant will need to provide support with - payroll records, PR tax returns, and other documents
11) SE Income of sole proprietor/commission/ independent contractor limited to $100,000
12) Multiple businesses owned by common owner(s) can each apply, affiliation rules not applicable
13) The 7(a) relief loan is guaranteed 100% by SBA
14) Allowable uses of funds are funds expended to cover:
a) Payroll costs include, salaries, wages, payroll taxes, retirement, group health, medical, medical and family leave
b) Mortgage interest
c) Rent obligation under a lease agreement
d) Utilities (electric, gas, water, phone, internet, and transportation included in this category)
e) Interest on any other debt obligation incurred before the covered period
15) SBA 7(a) express limits increased from $350,000 to $1 million through 12/31/20
16) Interest rate, 4% or less
17) Term up to ten years on balance of loan that is not forgiven (see below)**
18) No collateral required from borrower, no credit check, no UCC filing, no life insurance assignment
19) No personal guarantee by shareholders, members or partners
20) No origination fees or prepayment penalties
21) Loan payments deferred for between 6-12 months
22) No requirement that applicant prove that credit not available elsewhere
23) **There is loan forgiveness on loans made in the covered period, that for the eight weeks following funding date, loan proceeds are used for:
a) Payroll and related expenses
i) Must keep steady payroll
ii) Cannot reduce salaries
iii) Loan cancellation is reduced if there is reduction in average payroll
iv) Can apply for forgiveness and must prove compliance and use of funds
b) Rent, mortgage interest, and utilities
24) Loan forgiveness reduced if there is a reduction in the number of employees, or a reduction greater than 25% in wages paid to employees. Calculation based on FTEs per month at loan origination
25) No dividends for up to one year after loan is no longer outstanding
26) Debt forgiveness not included in taxable income
•Visit SBA.gov/disaster for more information.
If you are needing financial assistance, contact your personal banker, CPA and/or attorney as they should be able to help you determine which type of loan is best for your specific situation – some have higher total limits and some have a higher percentage that is forgivable. View list of Chamber member BANKS, ACCOUNTANTS and ATTORNEYS.
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