SBA Loans for Small Businesses Impacted by Coronavirus (COVID-19)
Economic Injury Disaster Loans
- The Small Business Administration (“SBA”) provides low interest Economic Injury Disaster Loans up to $2 million to help small businesses recover from declared disasters, including coronavirus (COVID-19).
- Many states have received an Economic Injury Disaster Loan declaration including New York, New Jersey, Connecticut, and Pennsylvania. Small businesses in these states are eligible for SBA disaster loans.
- These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of COVID-19’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
- These loans are offered with long-term repayments up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
How to Qualify:
- Economic Injury: Businesses will need to show they have suffered an economic injury as a result of the coronavirus (COVID-19) or related events.
- Supporting documentation: Business owners will need to supply required supporting documentation that could include the business’s most recent tax returns, a personal financial statement and a schedule of liabilities that lists all of the company’s current debts.
- Credit History: Applicants must have a credit history acceptable to SBA.
- Repayment: Applicants must show the ability to repay all loans.
- Collateral: Collateral is required for all Economic Injury Disaster Loans over $25,000. SBA takes real estate as collateral when it is available. SBA will not decline a loan for lack of collateral, but requires businesses to pledge what is available.
Access to Capital Programs
Standard 7(a) Program
- Offers loan amounts up to $5,000,000.
- The uses of proceeds include: working capital; expansion/renovation; new construction; purchase of land or buildings; purchase of equipment, fixtures; lease-hold improvements; refinancing debt for compelling reasons; seasonal line of credit; inventory; or starting a business.
- This program will continue to be available through banks and no changes are expected for their underwriting once the pending CARES Act is enacted.
Express Loan Program
- The express loan program provides smaller loans up to $350,000 for no more than 7 years with an option to revolve. There is a turnaround time of 36 hours for approval or denial of a completed application. The uses of proceeds are the same as the standard 7(a) loan.
How to Qualify:
Qualification is based on the lender’s unique eligibility requirements. Generally, eligibility is based on what a business does to receive its income, its ownership, and where the business operates. Normally, businesses must meet size standards (which varies based on industry/business type), be able to repay, and have a sound business purpose. Owners with at least 20 percent ownership must offer a personal guarantee.
- The SBA provides export loans to help small businesses achieve sales through exports and can help these businesses respond to challenges associated with trade, such as coronavirus (COVID-19). The loans are available to small businesses that export directly overseas, or those that export indirectly by selling to a customer that then exports their products.
- This program allows express access to capital for businesses that need financing up to $500,000. Businesses can apply for a line of credit or term note prior to finalizing an export sale or while pursuing opportunities overseas, such as identifying a new overseas customer should an export sale be lost due to coronavirus (COVID-19).
Export Working Capital
- This program enables small businesses to fulfill export orders and finance international sales by providing revolving lines of credit or transaction-based financing of up to $5 million. Businesses could use a loan to obtain or retain overseas customers by offering attractive payment terms.
How to Qualify:
- Applicants must have been in business for at least one year, must be entering or expanding in an existing foreign market and must not be financing offshore operations.
- Applicants must provide a detailed export business plan predicting first-year export sales and describing how the loan proceeds will be used.
- The one-year-in-business requirement can be waived if the business’s key personnel have demonstrated export expertise and previous successful business experience.