SBA Loan Resources
Posted March 30, 2020
SBA Loan Resources for Small Business during COVID-19
The Small Business Administration (SBA) understands that every industry, business, nonprofit and state is facing a financial impact, but small businesses are bearing the brunt of the disruption. There are two types of SBA loans during COVID-19:
- Disaster Loans under 7(b)(2) are available online directly through the SBA pursuant to a declared disaster. Eligibility requirements are currently relaxed, funds are paid within days, and the first $10,000 can be converted to a grant that does not require repayment.
- Paycheck Protection Loans under 7(a) are available through qualified SBA lenders, such as banks, and offer loans based on payroll. Loan forgiveness applies based on payroll, rent, and interest paid during the 8 weeks following the loan.
Businesses can receive both loans, as long as they do not pay for the same expenses. Also, new 7(b)(2) loans can be converted to 7(a) loans.
Economic Injury Disaster Loans (EIDL) and Loan Advance
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. In response to the COVID-19 pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for a Disaster Loan advance of up to $10,000.
The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.
To apply for a COVID-19 Economic Injury Disaster Loan, click here.
Paycheck Protection Program Loan
The Paycheck Protection Program creates a new small business loan program that can help businesses retain staff and remain solvent. The U. S. Chamber of Commerce released several resources to help small businesses take advantage of new CARES Act loan programs. The Coronavirus Emergency Loans Small Business Guide and Checklist will take you step-by-step through the process of preparing to file for a loan.
Under this section, any business or 501c(3) with fewer than 500 employees could receive a maximum of $10 million to help keep up with payroll, rent, utilities, interest on a mortgage debt incurred before Feb. 15.
If a business keeps all staff on payroll and doesn’t reduce standard pay below 75% of what was paid the prior year, any portion of the loan used for qualified costs in the 8 weeks following the issuing of the loan will be completely forgiven.
These loans will be expedited and accessible through any existing small business lender who can authorize the loan without receiving SBA approval. All payments on principle, interest and fees will automatically defer for 6 months, and the forgiven portion of the loan will not count toward the business’s taxable income. Any portion of the loan not forgiven will be carried forward as a traditional loan up to 10 years with a maximum interest of 4%.
This information is based on what is currently available, and more will be coming in this rapidly changing environment. Currently, every bank is waiting for formal guidelines and regulations from the SBA and Treasury. Hopefully these are received this week so banks can roll out the program.