By Catherine A. Burke
A version of this bulletin was originally posted on March 23 here, but this April 14, 2020 update includes new information.
The Small Business Association (“SBA”) launched its application portal for coronavirus-related emergency economic injury disaster loans in late March. Loans are available to U.S. small businesses and sole proprietors, small agricultural cooperatives, small tribal businesses, small ESOPs, and small nonprofit organizations. Applicants can find and complete the application at https://covid19relief.sba.gov/#/.
Applicants may apply for emergency economic injury disaster loans, which may be used to pay ordinary and necessary operating expenses, including payroll, supply chain costs, COVID-19-related sick leave, rent and mortgage payments, and existing debt no longer covered by business revenue. The program permits borrowers to obtain up to $2 million in loan funds, though industry and media analysts report that the SBA is drastically reducing loan amounts to keep pace with high demand. Interested businesses and sole proprietors are encouraged to apply as soon as possible to ensure that funds are still available when their applications are processed.
Disaster loan interest rates are fixed at 3.75% for small businesses and 2.75% for non-profits. Loans may be payable for a term of up to 30 years, depending upon a borrower’s ability to pay. The SBA has automatically deferred all repayment of coronavirus disaster loans for one year, and interest deferment may be available for up to four years. Borrowers can fold emergency economic injury disaster loans into forgivable loans made under the Paycheck Protection Program (“PPP”) if they meet certain requirements, but because emergency advances are automatically forgiven, they are excluded from the forgivable amount of PPP loans.
To be eligible for a disaster loan, an applicant must be experiencing financial hardship related to the coronavirus pandemic, and must meet the SBA’s revenue or headcount size standards. Generally, this means that the applicant must employ 500 or fewer employees, but exact size limits vary by industry. Click here to review the SBA Small Business Size Standards. An applicant also must have been in business since at least since January 31, 2020 to qualify for a disaster loan (which is much shorter than the SBA’s typical one-year pre-disaster requirement).
Businesses in need of immediate cash may request an emergency advance, which does not need to be repaid even if the loan request is later denied. The CARES Act permits advances of up to $10,000 and requires that advances be disbursed within three days of application. In practice, however, actual disbursal is taking longer in most cases and the SBA has implemented a cap on the advance amounts, limiting them to $1,000 per employee of the applicant business. The effect of the reduced advances on sole proprietors is not known.
How to Apply:
Complete the emergency economic injury disaster loan application at https://covid19relief.sba.gov/#/. Be aware that when you submit an application through this portal, you will not receive an e-mail confirmation, but you will receive an application number on the final screen of the application, which you should either write down, screenshot, or print for your records. The SBA should e-mail you when it starts processing your loan application.
To apply for a disaster loan, an applicant must submit: (1) a completed and signed Business Loan Application or Sole Proprietor Loan Application; and (2) an Economic Injury Disaster Loan Supporting Information Form. Applicants are not required to submit copies of their tax returns, but they must self-certify as to the accuracy of their applications, under penalty of perjury.
Timeframe for Approvals; Deadlines
The SBA currently expects to review and process all loan applications within 2-3 weeks. Due to strong demand, however, applicants may reasonably expect that these timeframes will be extended.
The current application deadline for emergency economic injury disaster loans is December 31, 2020. This deadline may be subject to change, particularly if the program exhausts available funds sooner.