In an effort to assist small businesses impacted by the Coronavirus, the Small Business Association (SBA) has recently expanded access to its Economic Injury Disaster Loan program for small businesses and private nonprofit organizations.  Under the revised criteria, disaster assistance loans are now available for small businesses in every state.

In order to qualify for a disaster assistance loan, among other things, the small business or private nonprofit organization must demonstrate that it has suffered an economic injury or business loss as a result of the Coronavirus.  If a business has an existing SBA loan, that will not prevent it from being able to apply for a disaster assistance loan.

These loans may be used to pay fixed debts, payroll, accounts payable and other bills that are unable to be paid as a result of the impact of the Coronavirus.  It is not intended to replace lost sales or profits or to be used to expand a business.  It also cannot be consolidated with another outstanding loan. Each loan application is reviewed on a case-by-case basis and a business may qualify for a secured loan up to $2 million.

The interest rate for these loans is 3.75% for small businesses and 2.75% for non-profits.  Terms of each loan are determined on a case-by-case basis and are based upon the applicant’s ability to repay and its credit history.  If approved, the loan can have a repayment term of up to 30 years.

A business can apply for a disaster assistance loan online at disasterloan.sba.gov/ela.  The following information/documentation will need to be completed and submitted in order for the application to be considered:

• Business Loan Application (SBA Form 5).
• IRS Form 4506-T for the applicant, each principal owning 20% or more of the applicant, each general partner or managing member and for any owner who has more than a 50% ownership in an affiliate business.
• Complete copies, including schedules, of the most recent Federal income tax returns of the applicant.
• Personal financial statements (SBA Form 413) by the applicant (if a sole proprietorship), each principal owning 20% or more of the applicant and each general partner or managing member.
• Schedule of Liabilities listing all fixed debts (SBA Form 2202).

Although not initially required to process the application, the SBA may also require the following:

• Complete copies, including schedules, of the most recent Federal income tax returns of each principal owning 20% or more of the applicant, each general partner or managing member and for any owner who has more than a 50% ownership in an affiliate business.
• If the most recent tax returns have not yet been filed, a year-end profit and loss statement and balance sheet for the applicable tax year.
• A current year-to-date profit and loss statement.
• Additional Filing Requirement (SBA Form 1368) providing monthly sales figures.

Once submitted, the assigned loan officer will review the amount of the losses incurred as a result of the Coronavirus and whether any additional information is needed in order to determine whether the applicant is eligible to receive a disaster assistance loan.  Assuming the loan is approved, loan documents will be provided for signature and a case manager will be assigned to provide assistance in making sure all conditions of the loan have been satisfied and to come up with an acceptable disbursement schedule.