We are in an economic crisis. There is no doubt it will be felt for months to come, especially for small businesses. The pandemic spread of the coronavirus (COVID-19) is shuttering many businesses during either voluntary or mandatory shelter-in-place orders from cities and states across the nation.
If you are a small business that has been impacted by this pandemic, there is good news for you. The Small Business Administration (SBA) offers Disaster Loan Assistance to qualifying small businesses. Here are the top questions about the program to help you understand if this program is right for you.
What is SBA?
The Small Business Administration (SBA) is a federal agency dedicated to supporting small businesses nationwide with counseling, capital, and contracting expertise. Through a network of local SBA offices, small businesses have access to resources to help them achieve their goal of entrepreneurship.
What is Disaster Loan Assistance?
The SBA provides low-interest loans (currently at 3.75%, and 2.75% for non-profits) of up to $2 million ($25,000 maximum for unsecured loans) for terms up to 30 years to businesses of all sizes, private non-profit organizations, homeowners, and renters. These loans are directly funded by the U.S. Treasury, so they do not have any application fees.
Loan funds can be used to repair or replace items damaged or destroyed in a declared disaster, to include real estate, personal property, machinery and equipment, inventory and business assets.
Who is eligible?
Currently, almost all types of for-profit small businesses and private non-profit organizations are eligible to apply. This includes restaurants, retailers, manufacturers, sports vendors, owners of rental property, souvenir shops, travel agencies, hotels, recreational facilities, charter boats, wholesalers, manufacturers, etc.
Criteria for loan approval will be based on the applicant’s credit history, business financial performance, and collateral requirements. Collateral will only be required for loans over $25,000.
Who is NOT eligible?
Some of the businesses that are ineligible for an Economic Injury Disaster Loan (EIDL) are:
- Agricultural Enterprises – if the primary activity of the business is as defined in Section 18(b)(1) of the Small Business Act – loosely defined as if you feed it, grow it or water it is considered agricultural and not eligible unless it is an agricultural aquaponic business.
- Religious or Charitable Organizations and Government-owned Concerns
- Businesses considered hobbies
- Gambling Concerns (more than 1/3 of annual gross revenue from legal gambling activities)
- Speculative Real Estate Businesses
How do I verify I am a small business?
To verify if you are designated as a “small business” visit the SBA’s Table of Small Business Size Standards site to assess your business size. The SBA will make the final decision as to who is eligible for EIDL once the entire application is submitted.
How can I use the loan funds?
Funds from Economic Injury Disaster Loans can be used for fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. Once the loan is funded, payments will be deferred up to 12 months, but interest will still be accruing. There are no pre-payment penalties.
What documentation do I need?
Some of the basic documentation needed includes:
- Tax Information Authorization (IRS Form 4506T) for the applicant, principals, and affiliates
- If most recent Federal Income Tax Return has not been filed, a year-end profit-and-loss statement and balance sheet for that tax year is acceptable
- Complete copies of the most recent Federal Income Tax Return – only required for loans over $500,000
- Schedule of Liabilities (SBA Form 2202)
- Personal Financial Statement (SBA Form 413)
- Additional Filing Requirements (SBA Form 1368) providing monthly sales figures
- Other information may also be requested – the application assigned SBA Loan Officer will contact you directly with further requested information
A complete list of documentation (with form links) is available here.
What is the application process?
You can apply for the loan online or mail a paper application. The online application is the fastest channel. Print the paper application to review what you need to provide before you start the online application. BE SURE to select “Economic Injury (EIDL)” as the type of loan you are applying for.
NOTE: Write down your password once you start. The SBA will not be able to reset your password if it is lost or forgotten.
Once submitted it will be assigned to an SBA loan officer to review your application and supporting documents, including credit history assessment. The SBA loan officer will determine your eligibility and will work with you to provide any further information needed to reach a loan determination.
For complete details on the application process, including loan closing and funds disbursement, refer to the SBA Disaster Loans Process chart. You can also contact the SBA’s Customer Service Center at 800-659-2955 for further assistance.
PRO TIP: Due to the recent high-volume of online application activity, it is recommended that you go online between 7 PM and 7 AM, outside SBA office hours, to submit your online loan application.
What resources are available to support and answer questions?
For questions or concerns, contact SBA Disaster Customer Service at 800-659-2955 or email them at DisasterCustomerService@sba.gov. Also, review the information online at SBA Disaster Loan Assistance and review the Disaster Loan Assistance FAQs.