If you qualify, now is the time to apply to and take advantage of a coronavirus SBA loan or grant. This money can be used in combination with payroll tax credits, other government benefits, and potential cash payments coming to give some breathing room.
These Emergency Injury Disaster Loans or EIDL loans are available if you have suffered a substantial economic injury and are located in a declared disaster area. I’d like to take a minute to explain how they work so you can determine if you should be applying for a coronavirus SBA emergency loan.
Is a Coronavirus SBA Emergency Loan Right for You?
Loan Amounts and Use
The SBA can provide up to a $2 million loan to help meet financial obligations. Substantial economic injury means the business is unable to meet its obligations and to pay its ordinary and necessary operating expenses. EIDLs provide the necessary working capital to help small businesses survive until normal operations resume after a disaster. Your loan amount will be based on your actual economic injury, 2019 financial statements, and your company’s financial needs.
Eligibility and Terms
You need to write down how your business had been affected, and a recovery plan to qualify for most of the funding resources.
Also, look for emergency resources in your state. In Pennsylvania, the Small Business First Fund has been announced and will be administered by the Pennsylvania Industrial Development Authority. Contact your local chamber of commerce or the Certified Economic Development Organization (CEDO) to find out where to submit an application for approval by PIDA. Loans can be approved by PIDA staff, and thus, if all requirements are met, and a complete application is submitted, each loan can be turned around rather quickly without PIDA board approval. To find a loan CEDO in your county, visit: https://dced.pa.gov/cedo/ For more questions about the fund can also be directed to the PIDA Office at 717.783.5046.
FAQs about the Coronavirus SBA Emergency Loan
I conducted some extra research on the coronavirus SBA emergency loan, and this information may answer some of your main questions.
What do you need to apply?
Before you apply, have this information ready:
- Compile your monthly sales figures
- Get your personal financial statements ready (they are required for the application)
- Compile your payables/liabilities & a listing of all fixed debts
- You must have a personal credit score of 620 or higher
- You must also have a physical presence in a declared disaster area.
Note: An applicant’s economic presence in a declared area ALONE does not meet this requirement. The physical presence must be tangible and significant. Merely having a PO box in the disaster area would not qualify as a physical presence.
How much can I borrow?
Eligible entities may qualify for loans up to $2 million. The interest rates for this disaster are 3.75 percent for small businesses and 2.75 percent for nonprofit organizations with terms up to 30 years. Eligibility for these working capital loans is based on the size (must be a small business), type of business, and its financial resources.
How can I use the loan funds?
These working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. The loans are not intended to replace lost sales or profits or for expansion.
What are the criteria for a coronavirus SBA emergency loan approval?
- Credit History: Applicants must have a credit history acceptable to SBA.
- Repayment: SBA must determine that the applicant’s business can repay the SBA loan.
- Eligibility: The applicant’s business must be physically located in a declared disaster area, and the business must have suffered working capital losses due to the declared disaster, not due to a downturn in the economy or other reasons.
What are the collateral requirements?
Economic Injury Disaster Loans over $25,000 require collateral. The maximum unsecured loan amount is $25,000. The SBA takes real estate as collateral when it is available. The SBA will not decline a loan for lack of collateral, but it does require borrowers to pledge what is available.
Submit Your Application As Soon As Possible
The biggest reason for delays in processing is due to missing information. If more funds are needed, applicants can submit supporting documents and a request for an increase. If fewer funds are needed, applicants can request a reduction in the loan amount. If the loan request is denied, the applicant will be given up to six months in which to provide new information and submit a written request for reconsideration.
Do you think you qualify for a coronavirus SBA emergency loan? My advice is to submit your application right away to avoid any delay in receiving your funds if you are approved. The coronavirus crisis may impact us for months to come, and we need to do everything we can to make sure our small businesses come out of it alive and well.