The U.S. Small Business Administration (SBA) is offering designated states and territories low-interest disaster loans to provide working capital to small businesses suffering economic injury as a result of the COVID-19 pandemic.
On March 19, 2020, the SBA designated small businesses and non-profit entities in all counties in Ohio as eligible for SBA Disaster Loan Assistance due to COVID-19 losses.
The SBA Economic Injury Disaster Loan Program offers up to $2 million in assistance per applicant. Approved recipients may use the funds in a variety of ways, such as to meet their ordinary and necessary financial obligations that cannot be met as a direct result of the pandemic, such as paying fixed debts, payroll, accounts payable and other bills that the businesses are struggling to pay because of COVID-19’s impact. The interest rates are equal to 3.75% for small businesses without credit available elsewhere and 2.75% for non-profits. Any small business with credit available elsewhere is not eligible for the loan. Loan terms can extend up to a maximum of 30 years, providing for a long-term payment option to keep payments affordable, but specific terms for each loan will be determined on a case by case basis. The SBA asks that you select only “Economic Injury” when applying for loans to replace working capital based on the pandemic.
The loan process has three steps:
- Apply for the loan: a) online at disasterloan.sba.gov/ela; b) in-person at a disaster center; or c) by mail. Call the SBA Customer Service at 1-800-659-2955 (TTY for the deaf and hard of hearing: 1-800-877-8339) or e-mail firstname.lastname@example.org for questions.
- The loan application through the SBA will require certain documentation for processing and having everything complete will help expedite the process. The loan application form specific to businesses is SBA Form 5. In addition to Form 5, all businesses, as well as all principal owners owning 20% or more of the applicant business, each general partner or managing member, and any owner who has more than 50% ownership in an affiliate business, will be required to complete Internal Revenue Service form 4506-T. In addition, each applicant business will be required to provide complete copies, including all schedules, of their most recent Federal income tax returns for the applicant business, a complete schedule of liabilities listing all debts (SBA Form 2202), and personal financial statements (SBA Form 413) signed by the applicant (if a sole proprietorship), each principal owning 20% or more of the applicant business and each general partner or managing member. Additional documents may be required, such as profit and loss statements, if the current year tax returns are not available.
- The SBA will review the applicant’s credit and eligibility. A loan officer will work with you to reach a determination. The goal is to have a decision within 2-3 weeks, but given the volume of claims, it may be wise to be prepared for a longer processing time.
- If approved, the loan will be closed, a case manager will be assigned and an initial disbursement will be made.
More detail is available here.