As of March 23, 2020, businesses in all US states can apply for disaster-assistance economic injury loans from the U.S Small Business Administration due to COVID-19. If you had an existing disaster loan with the SBA, it will now be deferred until December 31, 2020.
What is an SBA disaster loan?
An SBA disaster loan is a low-interest loan provided to small business owners from the U.S Small Business Administration to help them recover from a declared disaster such as a hurricane, drought, flooding, or tornado.
SBA Disaster Loans come in two main types:
1. Physical disaster loans
Designed to repair or replace business assets such as property, machinery or equipment.
2. Economic injury loans
Designed to help small businesses and private nonprofits during times of economic disaster where there is no physical damage to the business.
These loans cover operating expenses after a declared disaster and help cover debt, payroll, accounts payable and other bills, helping your business sustain a crisis period until normal operations can resume.
What are the usual terms for SBA Disaster loans?
SBA loans are determined on a case by case basis, but your business can be granted a loan of up to $2 million in capital, with up to a 30-year term. The average interest rate is 3.75% for small businesses and 2.75% for nonprofits, not exceeding 4%.
Who is eligible for an SBA disaster loan?
Physical disaster loans
Businesses of any size that are physically affected by the declared disaster.
Economic injury loans
Small businesses (fewer than 500 employees) suffering substantial economic injury as a result of the disaster that are unable to pay ordinary and necessary operating expenses. Your business must not be able to get financing elsewhere.
COVID-19 SBA Loans
Due to the circumstances of COVID-19, the SBA is now offering additional and adapted loans as a part of the Coronavirus Aid, Relief, and. Economic Security, or CARES act.
Paycheck Protection Plan (PPP)
Up to two months of average monthly payroll costs from the past year plus an additional 25%, up to a maximum of $10 million.
The loan will be forgiven if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
Economic Injury Disaster Loan
$1000 per employee, maximum of $10,000 grant - loan maximum of $2 million.
$10,000 advance grant is forgiven.
Express Bridge Loan
Enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000.
How do you apply for an SBA disaster loan?
Applying for an SBA loan is a 3 step process:
1. Apply for Loan
You can apply for the loan either online, in-person at a disaster center, or by mail.
- Your most recent Federal Income tax returns
- IRS Form 4506-T
- Personal Financial Statement
- Schedule of Liabilities listing all fixed debts
- A current year-to-date profit and loss statement
2. Property Verified and Loan Processing Decision Made
3. Loan Closed and Funds Disbursed
The SBA states that it will take approximately five days for review and three weeks for the receipt of funds once the loan is approved.
Do you need help?
If your business is suffering hardship brought on by the Coronavirus, we can help connect you with a local accountant to help you navigate the relief efforts available to you.