by Morgan Dilks
The U. S. Small Business Administration (SBA) provides low-interest, long-term disaster loans to businesses of all sizes, private non-profit organizations, homeowners, and renters to repair or replace uninsured/underinsured disaster damaged property. For economic disasters, such as the one created by the ongoing COVID-19 Pandemic, the SBA offers Economic Injury Disaster Loans (“EIDL”) to small businesses in order to provide for the continuity of business operations. SBA disaster loans offer an affordable way for individuals and businesses to recover from declared disasters, such as the COVID-19 disaster.
Who is eligible to receive an EIDL?
- This is available to small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, or private non-profit organizations, up to $2 million for economic injury.
- Currently the EIDL is available to small businesses states who have made a disaster declaration, currently 30 States, plus the District of Columbia. This includes Maryland, Pennsylvania, Delaware, Virginia, West Virginia and Washington, D.C.
Am I a Small Business as defined by the SBA?
- Small Business size is governed by 13 C.F.R. § 121.201. Whether your business qualifies is determined by the type of business. Some businesses are governed by revenue dollars on an annual basis, others are determined by number of employees. The chart provided in 13 C.F.R. 121.201 is instructive.
How do I apply?
- Fill out the U.S. Small Business Administration Disaster Business Loan Application and attach the requisite paperwork described below.
How does the SBA determine my loan amount?
- You may request a dollar amount in the application. Once the application is submitted, a loan officer will review your credit to determine eligibility and what amount of loan your business is qualified to receive.
What factors go into my eligibility to receive a loan?
- The SBA will review your credit before conducting an inspection to verify losses. Additionally, the SBA will review the attached business documentation, such as outstanding liabilities, P&L, and Balance Sheet to determine your need and your ability to repay a loan issued.
How long does it take?
- The SBA’s goal is to reach a decision on your application within 2-3 weeks. At that point, if your business qualifies for the loan you are seeking, the SBA will prepare and send your Loan Closing Documents to you for your signature. Once the signed Loan Closing Documents have been received by the SBA, an initial disbursement will be made to you within 5 days, of $25,000.00.
- In light of the ongoing pandemic, it would be wise to apply as soon as possible, as the volume of applications the SBA is receiving is likely far higher currently than it would normally be.
When do I get the balance of the loan?
- A case manager will be assigned to work with you to help you meet all loan conditions. They will also schedule subsequent disbursements until you receive the full loan amount.
What if things get worse than when I initially applied?
- Once the initial loan has been approved, your loan may be adjusted subsequently due to changing circumstances.
How long do I have to pay this back?
- A determination will be made by your loan officer based on your business’s ability to repay the loan. Terms can extend up to 30 years.
What is the interest rate on the loan?
- Private, for profit businesses will be charged an interest rate of 3.75%
- Non-Profit Organizations will be charged an interest rate of 2.75%
What paperwork is required?
- Copies of applicant’s 3 most recent Federal Income Tax Returns, including all schedules.
- Complete and sign Tax Information Authorization; IRS Form 8821
- Current (dated within 90 days of application) business balance sheet, a current profit and loss statement (income statement), and a current schedule of liabilities.
- For each owner having a 20% or more interest and each general partner, a current (dated within 90 days of application) personal finance statement (use SBA Form 413), a complete copy, including all schedules, of the most recent Federal Income Tax Return and a complete and signed IRS form 8821. Individuals with an ownership interest need only supply IRS form 8821 and a personal financial statement (SBA Form 413).
- A complete copy, including all schedules, of the latest Federal Income Tax Return for each affiliate. Affiliates include, but are not limited to, business parents, subsidiaries or other businesses with common ownership or management. Also, an authorized individual must complete and sign IRS Form 8821 for each affiliate.
- If your insurance covers all or part of this loss (regardless of the current status of your claim), provide the name and telephone number of your agent and/or claims adjuster. Also include the policy number and the name of the insurance company.
- SBA form 1368.
Important information for filing:
- For economic injury, make sure you check the “Economic Injury” box on the application.
- The Economic Injury Filing Deadline is currently December 21, 2020.
- The “Declaration Number(s)” box in the top right is seeking the disaster declaration for this disaster, which is state specific:
- Maryland – 16376
- Virginia – 16359
- Washington, D.C. – 16336
- Delaware – 16342
- Pennsylvania – 16360
Applications can be mailed or submitted online at the following addresses:
Mail: U.S. Small Business Administration
Processing and Disbursement Center
14925 Kingsport Road
Ft. Worth, TX 76155-2243
Wright, Constable & Skeen, LLP is committed to assisting our clients in this tumultuous time. Here is the SBA EIDL application package containing all of the forms that the SBA will require in order to consider a loan.
Visit our COVID-19 Resource Page for more updates.