If you’re a growing business in the U.S., you’ve probably heard the news: The federal government’s Small Business Administration (SBA) is offering its Economic Injury Disaster Loans to small businesses across the country and its territories that are experiencing a temporary loss of revenue due to COVID-19.
You may have also heard the rules around applications have changed slightly since the program launched in mid-March or that applicants are still waiting for their funds. Here, we’ll break down the current status of the program, how to apply for these loans, including the site you’ll need to visit, information you’ll need to provide and what to do after clicking “submit.”
What is the SBA Economic Injury Disaster Loan program?
The program existed before coronavirus changed the financial landscape for businesses across the U.S. However, some of its details changed with the passage of The Coronavirus Aid, Relief and Economic Security (CARES) Act on March 27 and again later as demand for the loans put strain on the system. Currently:
--The program provides “small businesses,” or those with fewer than 500 employees, with working capital loans of up to $2 million. These loans were initially to cover up to $2 million, but as of April 9, the SBA is telling numerous applicants the maximum amount is now just $15,000 due to demand, reports the New York Times.
--During the original application process, businesses could also apply for a $10,000 loan advance, which, if granted, they were set to receive within three days of a successful application, per the SBA. That hasn’t happened, according to multiple reports. Firstly, the SBA changed the rules on April 6 such that companies can receive advances of only $1,000 per employee, up to $10,000 or 10 employees. Additionally, Sen. Rob Whittman confirmed in a tweet on April 8 that the process will now take five days from the time an application is approved, though many businesses report having waited much longer with no sign of cash. Unlike the working capital loans above, these advances will not have to be repaid.
--Each of these loans “may be used to pay fixed debts, payroll, accounts payable and other costs but are not intended to replace lost sales or profits,” according to the SBA.
To learn more straight from the SBA, visit the Administration’s page about Disaster Loans.
How do I apply for an SBA Disaster Loan?
The application is a short and simple online survey that we estimate you can complete in less than 30 minutes, though the SBA says it could take up to two hours. To get started, visit the application page.
Information required to apply for an SBA Disaster Loan
While filling out the application page, here is the information you’ll be required to give.
I. Business information
--Business name/trade name
--Organization type (also known as your business structure)
--For nonprofits and franchises: check a box stating your business’s identity as such
--For sole proprietorships: provide your EIN/SSN number
--Gross revenue, in dollars, for the 12 months before the date of the event warranting need of a loan. (For COVID-19, this is Jan. 31, 2020.)
--Cost of goods sold, in dollars, for the 12 months before the date of the event (Jan. 31, 2020)
--Business contact info (address, phone, email)
--Date business was established
--Your “business activity.” (The drop-down list includes categories like “Communications,” “Eating & Drinking Places,” “Freight,” etc.)
--Number of employees
II. Business owner(s) information
This basic form includes information like your name, email, address and social security number. You’ll also state your percent ownership in your business.
*A note on the amount of your loan
You will not state the amount of the loan you’re seeking in your application. Once you apply, a loan officer will check your credit rating, income statements and tax returns “to determine how badly your business needs the loan,” explains bookkeeping company Bench.
The current application page does, however, allow you to check a box that denotes you’d like to be considered for the $10,000 loan advance and provide details for a bank account to which the SBA can send that money. (Again, the Administration says the funds should arrive within three days of a successful application.)
Completing the application process
Once your business information has been submitted, you will receive a 10-digit application number. Print that page, and save the application number for your records.
Congratulations, you have now completed your application for the COVID-19 Economic Injury Disaster Loan!
Okay, I’ve applied. What do I do now?
Unfortunately, there’s nothing to do but wait. The SBA will contact you at the email address provided if they need additional information after your application has been processed. They’ll likely connect you with a loan officer and case manager who will request additional paperwork including income tax returns and profit and loss statements.
We’ve asked businesses in our network whether they’ve received a loan and, if so, how long it took. So far, we haven’t got any reports back. It looks like the Twitterverse is in the same boat: Many report having applied for loans, but we’ve yet to spot a tweet from someone who received SBA funds. We’ll update this post as soon as we have stories to share.
Are there other federal loan options for small businesses?
Yes. The government’s Coronavirus Aid, Relief and Economic Security (CARES) Act made available an additional $350 billion to help small businesses. The new program that is distributing that money, known as the Paycheck Protection Program, is accepting applications for low-interest, federally-backed loans to small businesses. However, banks that act as the lenders for this program have struggled to uniformly accept applications and process loans in the week since the program launched.
We’ll continue updating this post with the latest status of the federal government’s loan programs. In the meantime, see our guide to alternative sources of financial relief.
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