COVID-19: SBA Disaster Loan Eligibility and Application Assistance

SBA’s Disaster Declaration Makes Loans Available Due to the Coronavirus (COVID-19)

The U.S. Small Business Administration (SBA) is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19).

Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provide by the Coronavirus Preparedness and Response Supplement Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.

What businesses are eligible to apply?

SBA’s Economic Injury Disaster Loans (or working capital loans) are available to small businesses, small agricultural cooperatives, small aquaculture businesses and most private non-profit organizations.

This includes:
• Businesses directly affected by the disaster
• Businesses that offer services directly related to the businesses
in the declaration
• Other businesses indirectly related the industry that are likely to be harmed by losses in their community

(Example: Manufacturer of widgets may be eligible as well as the wholesaler and retailer of the product.

What is the criteria for a loan approval?

Credit History-Applicants must have a credit history acceptable to SBA.

Repayment –SBA must determine that the applicant business has the ability to repay the SBA loan.

Eligibility- The applicant business must be physically located in a declared county and suffered working capital losses due to the declared disaster, not due to a downturn in the economy or other reasons.

How much can I borrow?

Eligible entities may qualify for loans up to $2 million.

The interest rates for this disaster are 3.75 percent for small businesses and
2.75 percent for nonprofit organizations with terms up to 30 years.

Eligibility for these working capital loans are based on the size (must be a
small business) and type of business and its financial resources.

How can I use the loan funds?

These working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. The loans are not intended to replace lost sales or profits or for expansion.

What are the collateral requirements?

•    Economic Injury Disaster Loans over $25,000 require collateral.
•    SBA takes real estate  as collateral when it is available.
•    SBA will not decline a loan for lack of collateral, but requires borrowers to pledge what is available.

What kinds of small businesses can apply?

Examples of eligible industries include but are not limited to the following: hotels, recreational facilities, charter boats, manufactures, sports vendors, owners of rental property, restaurants, retailers, souvenir shops, travel agencies, and wholesalers.

What other criteria is involved?

The applicant business must have a physical presence in the declared disaster area. An applicant’s economic presence alone in a declared area does not  meet this requirement. The physical presence must be tangible and significant. Merely having a P.O. Box in the disaster area would not qualify as a physical presence.

SBA’s Economic Injury Disaster Loan (EIDLs) funds come directly from the U.S. Treasury.

Applicants do not go through a bank to apply. Instead apply directly to

SBA’s Disaster Assistance Program at: DisasterLoan.sba.gov

There is no cost to apply. There is no obligation to take the loan if offered. The maximum unsecured loan amount is $25,000. Applicants can have an existing SBA Disaster Loan and still qualify for an EIDL for this disaster, but the loans cannot be consolidated.

Basic Filing Requirements

  • Completed SBA loan application (SBA Form 5 or 5C)
  • Tax Information Authorization (IRS Form 4506T) for the applicant, principals and affiliates.
  • Complete copies of the most recent Federal Income Tax Return.
  • Schedule of Liabilities (SBA Form 2202).
  • Personal Financial Statement (SBA Form 413).Other Information may also be requested.

Ineligible Entities

What are some of the businesses that are ineligible for an Economic Injury Disaster Loan?

• Agricultural Enterprises -If the primary activity of the business (including its affiliates) is as defined in Section 18(b)(1) of the Small Business Act, neither the business nor its affiliates are eligible for EIDL assistance.
• Religious Organizations
• Charitable Organizations
• Gambling Concerns (Ex: Concerns that derive more that 1/3 of their annual gross revenue from legal gambling activities)
• Casinos & Racetracks (Ex: Businesses whose purpose for being is gambling (e.g., casinos, racetracks, poker parlors, etc.) are not eligible for EIDL assistance regardless of 1/3 criteria above.

How To Apply

Applicants may apply online using the Electronic Loan Application (ELA) via SBA’s secure website at https://disasterloan.sba.gov/ela.  Additional Resources may also be found at the South Carolina Department of Commerce COVID-19 Business Resource Center – https://www.sccommerce.com/doing-business-here/join-community/emergency-preparedness.

•    Paper loan applications can be downloaded from www.sba.gov/disaster.
Completed applications should be mailed to: U.S.  Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.

•    Disaster loan information and application forms may also be obtained by calling    the    SBA’s   Customer   Service   Center     at    800-659-2955 (800-877-8339 for the deaf and hard-of-hearing) or by sending an email to disastercustomerservice@sba.gov.

Assistance From SBA Partners

Free  assistance with  reconstructing financial  records, preparing
financial statements and submitting the loan application is available from any of SBA’s partners: Small Business  Development Centers (SBDCs), SCORE, Women’s Business Centers (WBC), and Veteran’s Business Outreach Centers and local Chambers of Commerce.

For the nearest office, visit: https://www.sba.gov/local-assistance

Submit Your Application As Soon As Possible

Recheck  the filing requirements to  ensure that  all the needed information is submitted.

The biggest reason for delays in processing is due to  missing information.  Make sure to complete all filing requirements before submitting the application and forms.

If  more funds are needed, applicants can submit  supporting documents and a request for an increase. If less funds are needed, applicants can request a reduction in the loan amount.

If the loan request is denied, the applicant will be given up to six months in which to provide new information and submit a written request for reconsideration.

If you or your business needs assistance in complete the SBA Coronavirus Disaster Relief Loan, please contact the SBA (contact information listed above) or our law firm.

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