Small Business Administration Disaster and Economic Injury Loan Information

by | Mar 25, 2020

 

In response to the Coronavirus and its impact on businesses, the SBA has made new loans available. To highlight the components of the program, please see the information outlined below with additional resource links.

Commissioning:

  • H.R. 6074, Public Law No. 116-123.
  • In the above bill and subsequent law, $8.3 billion of emergency funds were appropriated to assist with economic issues arising from the COVID-19 (Coronavirus) pandemic.
  • Although the law’s main pillars focused on much needed support for health agencies and organizations, it also allocated funds for the Small Business Administration direct expenses to carry out the Disaster Loans Program in Title II.
  • Also located within Title II, the Coronavirus was deemed a disaster.  This allowed for funds to be made available under the “Disaster Loans Program Account”.
  • You can access this information here: https://www.congress.gov/bill/116th-congress/house-bill/6074/text

Disaster Loans:

  • With the above outlined disaster proclamation, the SBA is now authorized to originate loans to those small businesses affected by the Coronavirus.
  • The SBA works with state or territorial authorities to determine disaster status and outline what may be needed by those affected businesses.
  • Texas has had disaster status declared dating back to January 31, 2020 from review of the SBA website here: https://disasterloan.sba.gov/ela/Declarations.

Eligibility:

Terms:

  • The SBA’s Economic Injury Disaster Loans offer up to $2 million in loans to overcome lost revenue and maintain the ability to pay key expenses such as those for fixed debts, payroll, accounts payable, and other bills that cannot be paid resulting from the impact of the Coronavirus.
  • Also see the guide on common issues small businesses may encounter: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
  • Interest rates are stated to be 3.75% for small businesses and 2.75% for non-profit organizations.
  • Loans are offered with long repayment terms, up to a maximum of 30 years.
  • Terms will be determined on a case by case basis evaluating need and the borrower’s perceived ability to repay.
  • Currently, there is no cap on how much money can be disbursed through the disaster program, however the maximum of $2 million per borrower seems to be holding for now. Legislation is currently pending.
  • These loans should be expected to be collateralized.

Timing:

  • The SBA takes approximately 5 days to review applications and then three weeks for the receipt of funds once the loan is approved.
  • It will be key to apply soon if you think you will need these funds.  It appears that it is an approximate 1-month turnaround before cash is received.
  • The SBA is anticipating hundreds of thousands of loan applications, if not more.

Administration:

  • At times, SBA loans are originated with a local banking partner. For disaster loans, they are administered directly with the SBA.
  • It is recommended to have everything needed on the checklist before applying.  Details can be found here: https://disasterloan.sba.gov/ela/Documents/Three_Step_Process_SBA_Disaster_Loans.pdf
  • Be prepared to follow up quickly once the SBA reaches out.  This will keep the process running quickly and smoothly. 
  • Be prepared to support how the funds will be used for qualified expenses.

Where to go:

As your trusted advisors, we are committed to keeping you well-informed about new solutions to current business dilemmas.  

Sources referenced or used herein:

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources.

This by no means is a recommendation to obtain a loan or attempt to apply for a loan. There are many unknowns at this time regarding what other stimulus (grants or other loan options) that may become available with pending and future bills, executive orders, or emergency declarations to follow, that may become laws. Consult your legal and business advisors prior to making financing decisions. In no way should any advice herein be relied upon without consulting your business and/or legal advisors; as such, KHA Accountants, PLLC will not be held liable for any decisions or actions taken as result of the above information. It is intended for illustrative and discussion purposes only.

 

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