News Staff Report
The National Disaster Relief Program is now active for all “Small Businesses” in Alabama, offering loans to those businesses who have suffered or are suffering economic hardship due to the COVID-10 pandemic. The state was added to the eligibility list by SBA on March 21.
The program provides working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes to meet their ordinary and necessary financial obligations that cannot be met as a direct result of the virus and the resulting quarantines and restrictions associated with it.
Business entities that meet the SBA’s disaster relief loan criteria may borrow up to $2 million at a fixed interest rate of 3.75 percent on loans to for-profit companies and 2.75 percent fixed interest rate on loans to non-profits.
Those who are granted the loans may be eligible for up to 30-year terms and amortization (determined on case-by-case basis). Loan proceeds may be used only for fixed debt payments, payroll, accounts payable and other bills that can’t be paid because of COVID-19’s impact.
Economic injury disaster loans cannot be used to refinance long-term debts.
Not all will qualify
Loan applicants must have a credit history that is acceptable to SBA and must show the ability to repay the loan. Collateral is required for all EIDL 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 SBA will require the borrower to pledge collateral that is available.
Other restrictions include that applicants who have not complied with the terms of previous SBA loans may not be eligible. This includes borrowers who did not maintain required flood insurance and/or hazard insurance on previous SBA loans. Loan applicants should check with agencies / organizations administering any grant or other assistance program under this declaration to determine how an approval of an SBA disaster loan might affect their eligibility.
To protect each borrower and the Agency, SBA may require applicants to obtain and maintain appropriate insurance. By law, borrowers whose damaged or collateral property is located in a special flood hazard area must purchase and maintain flood insurance that is the lesser of (1) the total of the disaster loan, (2) the insurable value of the property, or (3) the maximum insurance available.
Hard stuff first
While Economic Injury Disaster Loans can be a lifeline, they will take time to acquire.
Alabama SBDC recommends that business owners take action now to preserve cash and protect assets. They should be in contact with their lending institutions to see what programs the bank/credit union might offer during this time (delaying payment requirements/interest-only payments) and vendor payments on account. Do the hard stuff first.
The following documentation will be required for application. Although the application is online, SBDC recommends that business owners familiarize themselves with the paper forms so the information can be filled out ahead of time. (Forms are available at https://disasterloan.sba.gov/ela/Information/PaperForms.)
*SBA Loan Application (SBA Form 5).
*Tax Information Authorization (IRS Form 4506-T) for each owner with minimum 20-percent ownership interest in the business.
*Federal personal and business tax returns for the last 3 years, including all schedules (include personal tax returns for each owner with minimum 20-percent ownership interest in the business).
*Personal Financial Statement (SBA Form 413D) for all owners of the business with minimum 20-percent ownership interest.
*Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used).
*A current year-to-date profit and loss statement and balance sheet.
*Monthly sales figures beginning 3 years prior to the disaster and continuing through the most recent month available. (SBA Form 1368). Total figures for each year should reconcile to the sales figures on corresponding tax returns.
*Written explanation of the amount you are seeking and how it will be used, as well as a description of the loss.
Visit https://disasterloan.sba.gov/ela/Account/Login to begin the online application. Make sure to download all forms in a ZIP file.
More info available
Next, does your business meet SBA small business requirement size standards for this assistance? The size standards are by NAICS Code Classifications, which are available at naics.com.
SBDC will also continue from time to time to host “Preparing to Apply for the SBA Economic Injury Disaster Loan” webinars. To keep abreast of the scheduled webinars, visit https://bitly.com/EIDL-Webinar3. In addition to covering the application process, the agency will also share what it has learned from SBA and other SBDC programs about turnaround time and feedback.
Applicants may apply online, receive additional disaster assistance information and download applications at https://disasterloan.sba.gov/ela, call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information on SBA disaster assistance. Individuals who are hearing-impaired may call (800) 877-8339.