From restaurants local stores to trucking companies and other transportation businesses, companies across the country have felt a serious financial squeeze due to Coronavirus.   If your business has been hurt as a result, there may be a promising option through the United States Small Business Administration (“SBA”).

On March 4, 2020, Congress allocated $8.3 billion to assist small businesses battling the coronavirus as part of an emergency spending package.  On Wednesday March 11, 2020, President Trump asked Congress to approve an additional $50 billion for SBA loans that will help businesses hurt by the virus.

As provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act, the SBA is offering program low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19).  Among other requirements, the business must be located in a designated state or territory that has opted into the program at the request of the state’s or territory’s governor.  Businesses cannot qualify unless and until the state’s governor submits the request for Economic Injury Disaster Loan assistance.

The SBA has estimated 30 million businesses have been impacted and might need these relief loans.  The earliest qualifying businesses that apply with all proper paperwork are the most likely to receive loans before funding runs out.

Navigating the application process can be tricky, and application errors and incomplete information can delay the application review.  For these reasons, businesses may wish to consider getting legal assistance from an attorney to help support the business during this process.

Maximum loan amount:  $2 million.

Interest Rate: The interest rate for small businesses is 3.75% without credit available elsewhere (2.75% for non-profits); businesses with credit available elsewhere are not eligible.

Permitted uses of loan money:  These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.

Length of Loans: The loans will be offered with long-term repayments, up to a maximum of 30 years. Repayment term periods are determined on a case by case basis.

Some of the Required Application Forms:  If your state’s governor elects (or has already elected) to participate in the program and your business is in a qualifying area (which businesses must verified with the SBA), the SBA has identified the following required application forms and supporting materials:

  • Business Loan Application (SBA Form 5) completed and signed by business applicant. This application is also available online.
  • IRS Form 4506-T completed and signed by Applicant business, each principal owning 20% or more of the applicant business, each general partner or managing member and, for any owner who has more than a 50% ownership in an affiliate business. (Affiliates include business parent, subsidiaries, and/or businesses with common ownership or management).
  • Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business; an explanation if not available.
  • Personal Financial Statement (SBA Form 413) completed, signed and dated by the applicant (if a sole proprietorship), each principal owning 20% or more of the applicant business, each general partner or managing member.
  • Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used).

ADDITIONAL INFORMATION THAT THE SBA MAY ALSO REQUIRE IN ORDER TO PROCESS YOUR APPLICATION:

  • Complete copies, including all schedules, of the most recent Federal income tax returns for each principal owning 20% or more of the applicant business, each general partner or managing member, and each affiliate when any owner has more than a 50% ownership in the affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management.
  • If the most recent Federal income tax return has not been filed, a year-end profit and loss statement and balance sheet for that tax year is acceptable.
  • A current year-to-date profit and loss statement.
  • Additional Filing Requirements (SBA Form 1368) providing monthly sales figures.

As noted, if your company wishes to seek a SBA conronavirus disaster relief loan, it is important move quickly before the funding is exhausted.  Please contact our Charleston business law firm if you or your company needs assistance.