Running a small business during the COVID-19 epidemic presents unprecedented challenges. To support small businesses during this period, the federal government passed the CARES Act, which includes several financial support programs for small businesses and their employees.
Pursuant to CARES, the current SBA emergency loan program has been expanded by an additional $ 10 billion. Read on to learn more about how the SBA Disaster Loan Program works, which businesses are eligible, and how to apply.
A Brief Overview of the SBA Economic Disaster Loan Program
The SBA, or the US Small Business Administration, is a government agency that provides educational resources for small businesses, guarantees small business bad credit loans, and provides financial assistance to small businesses during disasters. While this guide specifically focuses on the SBA Economic Loss Loan Scheme, the SBA offers a wide variety of loan types. For more information, see “What You Need to Know About an SBA Loan.”
If you live in a hurricane-prone area, you are likely familiar with the SBA Affordable Disaster Loan (commonly known as the SBA Disaster Loan). Typically, this program provides low-interest loans to small businesses affected by natural disasters such as hurricanes or tornadoes. However, the program has recently been expanded to include small businesses that have been adversely affected by COVID-19.
What businesses are eligible for the SBA disaster loan?
SBA Economic Disaster Loans are available to businesses with fewer than 500 employees located in the state that declared the disaster. An announced disaster means your state is in a state of emergency. The term is often used to refer to states that experience floods, hurricanes, tornadoes, or other adverse weather events.
However, the impact of the COVID-19 epidemic was so severe that most states in the US declared states of emergency. Check out this SBA page to see if your condition qualifies for an SBA disaster loan. Most states should declare a state of emergency. Therefore, check frequently that your condition is not currently on the list.
How do SBA disaster loans work?
Amount and terms
Damage loans of up to $ 2 million are available to businesses for 30 years. Your business’s eligibility level depends on many factors, including lost wages, salaries, and rent.
Interest, commissions and amortization
Interest rates are 2.75% for nonprofits and 3.75% for nonprofits. There is no application fee for loans under $ 25,000 and a $ 100 processing fee for previous loans. You will begin to pay off the loan 12 months after receiving the funds.
Loans under $ 25,000 are not guaranteed to be guaranteed. No special guarantees are required for loans over $ 25,000. Instead, the business owner will provide a personal guarantee and the SBA will provide a UCC-1 flat rate instead.
Proper ways to use the loan
You can use the loan proceeds for any of the following purposes: labor costs, salary, sick leave, rent or mortgage, material costs, and pre-existing debt. While you may qualify for other CARES financial assistance programs in addition to the SBA disaster loan, separate business use cases must be listed for each program.
How do I apply for an emergency loan from the SBA?
The SBA recently started a streamlined application process to make funds available to businesses that need them more quickly. The application process takes approximately two hours.
The following is information and documents that you will need to submit:
- Basic business information, such as the legal name of the company, the employer identification number (EIN) and the date of registration
- Gross turnover from January 31, 2019 to January 31, 2020
- The cost of goods sold from January 31, 2019 to January 31, 2020
- Information about the business owner
- Number of employees as of January 31, 2020
When can I expect my money?
The SBA has streamlined the existing loan application process to deliver funds to small businesses much faster given the severity of COVID-19. For loans up to $ 500,000, the SBA expects a decision on your application to be made within hours after your application is submitted. Expect them to send money to your business a week or two after your application is completed.
As part of this program, the SBA now also offers emergency disaster advancements. Once a small business completes a disaster loan application, it can request a cash advance of up to $ 10,000. The funds will be available within three days of receipt of the request. You can allocate funds to pay for sick leave for employees who are unable to work due to the direct impact of COVID-19, payroll, materials, rent or mortgage payment, or reimbursement.
Additional temporary SBAs were established to support small businesses under the CARES Act. For more information, see the SBA’s Coronavirus Rescue Options page.
Can You Get SBA Loans In The Event Of Economic Disasters?
SBA Economic Disaster Loans are not eligible for a loan. However, other SBA loans are also available. For example, loans may be made under a compensation protection program (PPP) if the funds are used for eligible expenses. Check out our guide to learn more about how salary loans work and our online money for bad credit borrowers offer.
The SBA also offers small business debt relief for current 7 (a), 504, and microloans, as well as new loans that are paid off by September 27, 2020. PPP loans are not eligible for this scheme. The SBA pays the 6-month principal, interest, and all related fees owed to its borrowers. Visit the company’s website to learn more about the SBA Coronavirus Debt Relief Program.
GreendayOnline is here to help small businesses. For more helpful information for small businesses affected by COVID-19, visit our COVID-19 Resource Center.