Over these next few weeks, the Chamber is hosting the Business Leaders Series, which will consist of webinars and video resources. The Chamber kicked off the series with District Director Herb Austin from the U.S Small Business Administration (SBA), who discussed disaster loans for small businesses.
About the SBA – The U.S Small Business Administration is a champion and advocate of small businesses. The SBA specialized in three core areas: capacity building, assisting small businesses in getting government contracts and financing. Nationwide, the SBA provides $30 billion annually to small businesses.
Economic Injury Disaster Loan – The Small Business Administration (SBA) has designated COVID-19 as a qualifying event for the provision of Economic Injury Disaster Loans (EIDL) for businesses and private non-profits in affected communities. On March 3, 2020, Texas businesses became eligible to apply. Businesses can request a maximum of $2 million with a 3.75% interest for 30 years. Non-profits are eligible to apply, and they receive an interest rate of 2.75%. In addition to the application, which is on the SBA website, businesses need to submit their Federal income tax return, personal financial statement (for companies that own 20% more of the business) and schedule of liabilities listing all fixed debt.
The following are highlighted questions from the Chamber’s live webinar:
How long will it take to get a response?
Given the widespread nature of the COVD-19 crisis, it is difficult to tell. This is the first time the SBA will be handling small businesses from all over the U.S. affected by a declared disaster. All the applications are processed in a single office, which is in the process of hiring more people. To expedite the process, make sure your application is complete when submitted.
How do you qualify as a small business?
About 97% of businesses in the U.S. meet the Federal definition of small businesses. Manufacturers qualify if they have 500 people or less, while wholesalers need 100 people or less. The criteria for construction companies is based on annual revenue, and they need $35 million in revenue or less.
What is the difference between the Disaster Relief Loan and Business Interruption Loan?
Currently, the business interruption loan does not exist yet. If passed, a new piece of legislation could allocate $300 billion for small businesses. The main difference is the Business Interrupted Loan will require businesses to go to a bank or lending institution to apply. Since the money comes from the bank, they will need to make the approval. The Disaster Relief Loan comes directly from the Treasury, which is why businesses apply with the SBA.
Is the Disaster Loan funding immediate?
Given the Disaster Loan was recently approved for Texas, the program is up and running. You can apply now on our site.
Is a non-profit eligible for a Disaster Loan?
Absolutely. Non-profits are eligible to apply, and they receive an interest rate of 2.75%.
Do you have any tips to ensure approval?
The loan is intended for businesses that are negatively affected by COVID-19. Businesses must provide information that demonstrates that their company was doing well before the virus. The SBA looks for proof of impact and analyzes whether you can pay the debt.
I read that businesses that have credit elsewhere are ineligible. Could you please explain what this means?
To be approved, the SBA looks at a company’s net worth. Typically, small businesses do not have large amounts of money in reserves. The SBA looks at whether businesses can continue to pay debt, rent and employees to ensure the loan goes to the companies who are in need.
Is collateral needed for a loan?
For a loan less than $25,000, there is no collateral. The SBA requires businesses with loans higher than $25,000 and up to $ 2 million to put up collateral if they have it. People are not turned down because of a lack of collateral.
Are banks involved in the process for small businesses to apply for the loan?
No. Businesses apply directly with the SBA.
Are there any other suggestions for information businesses need to gather?
The SBA requires a personal financial statement, income tax return and list of liabilities that are already a part of the application.
Will the SBDC or SCORE be able to assist businesses with applications for the loan?
Absolutely. The Small Business Development Center (SBDC) also assists people who are not approved for our disaster loan. CLICK HERE to view the Tarrant SBDC website
Is credit on an individual considered, or do businesses need credit?
The SBA carefully looks at both. They want to make sure you have a history of paying debt and are capable of doing so. The first thing the SBA does is pull a credit score.
Is there a minimum credit score needed?
No. It’s on a case by case basis.
There has been a discussion of a waiver of the business interruption loans at some point. I understand these have not been approved yet, but do you anticipate any waiver offered for disaster loans as well?
No, a waiver is not anticipated right now.
Director Herb Austin closed the webinar by stressing the importance of businesses applying early and making sure their application is complete when submitted. You can listen to his full perspective in the video below. CLICK HERE to learn more about Economic Injury Disaster Loans on the SBA’s website. To learn more about resources the Chamber is providing businesses facing the COVID-19 pandemic, CLICK HERE.