March 31, 2020 – Details and Resources re: SBA Federal Disaster Loans/Payroll Protection Program
The U.S. Small Business Administration (SBA) is offering low-interest federal disaster loans for working capital to small businesses in your state that are suffering substantial economic loss as a result of the Coronavirus (COVID-19).
Eligibility for Economic Injury Disaster Loans is based on the financial impact of the Coronavirus (COVID-19). The interest rate is 3.75 percent for small businesses. The interest rate for private non-profit organizations is 2.75 percent. SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years and are available to entities without the financial ability to offset the adverse impact without hardship.
Applicants may apply online, receive additional disaster assistance information and download applications at https://disasterloan.sba.gov/ela. Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email firstname.lastname@example.org for more information on SBA disaster assistance. Individuals who are deaf or hard of hearing may call (800) 877-8339. For complete details on SBA, visit www.sba.gov.
SBA Customer Service Representatives will be available to answer questions about SBA’s Economic Injury Disaster Loan program and explain the application process at 1-800-659-2955.
Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Within the $2 trillion package, there are allotments $10 Billion for EIDLs to help small businesses.
The EIDLs expanded provisions include:
- EIDLS can be approved by the SBA based solely on an applicant’s credit score (not repayment ability and no tax return is required). Mr. Contreras specified that a prior bankruptcy doesn’t disqualify you.
- EIDLS smaller than $200,000 can be approved without a personal guarantee. They are also not requiring real estate as collateral and will take a general security interest in business property.
- Borrowers can receive $10,000 in an emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue loss.
- It expands access to sole proprietors or independent contractors, as well as tribal businesses, cooperatives, and ESOPs with fewer than 500 employees and all non-profits including 501(c)(6)s
To qualify for an EIDL under the CARES Act, the applicant must have suffered “substantial economic injury” from COVID-19. EIDL loans under the CARES Act are based on a company’s actual economic injury determined by the SBA (less any recoveries such as insurance proceeds) up to $2 million. EIDL loans may be used for payroll and other costs as well as to cover increased costs due to supply chain interruption, to pay obligations that cannot be met due to revenue loss and for other uses. The interest rate on EIDL loans is 3.75% fixed for small businesses and 2.75% for nonprofits. The EIDL loans have up to a 30-year term and amortization (determined on a case-by-case basis).
The CARES Act also permits applicants to request an advance of up to $10,000 to pay allowable working capital needs; the advance is expected to be paid by the SBA within 3 days. This advance is essentially a grant and is not required to be repaid, even if the application is denied, but the amount of the advance must be deducted from any loan forgiveness amounts under a PPP loan, described above.
EIDLs under the CARES Act do not require personal guarantees for loans up to $200,000, but do require personal guarantees by owners of more the 20% of the borrower for loans in excess of that amount. The CARES Act waives the requirement for the borrower to demonstrate that it is unable to obtain credit elsewhere. However, unless changed by the SBA, it appears that the requirement for collateral on EIDL loans over $25,000 would still apply, and, in processing a borrower’s application, the SBA must make a determination that the applicant has the ability to repay the loan. Further, the SBA can approve a loan based solely on the credit score of the applicant or other means of determining the applicant’s ability to repay the loan, without requiring the submission of tax returns, which should expedite approval of EIDLs during the covered period.
Applications for EIDL loans should be submitted directly to the SBA. https://www.sba.gov/funding-programs/disaster-assistance
Additional Resources/Documents to assist small businesses and non-profit organizations through this process:
PAYCHECK PROTECTION PROGRAM Local Lending Process for PPP Begins Friday, April 3rd: Businesses may continue to apply online for the EIDL for Small Business Disaster Relief . Beginning April 3rd, the application process opens for the Payroll Protection Plan. You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
VALUABLE RESOURCES FOR SMALL BUSINESS:
Posted by: Kellie Goodman Shaffer . 3.31.2020. 16:19 Email Kellie