This is information that I am providing to my clients. Hopefully it proves helpful to many of you who own small businesses.
Specifics on the new programs related to the CARES act have not been approved by Congress and rolled out to the banks yet, but this is what I know so far about the SBA Disaster Program and I am willing to pass along “new Information” as it is received. But right off the bat it is important to know that the SBA moves much slower than the business world.
In the meantime, if you don’t already know about the SBA Disaster program, I have some additional information that I can send via private message. Hopefully, this information proves helpful to some of you. I’ve been told the website is on overload so if you want to apply, you may want to do it at “off hours”.
Here’s a recap of the EIDL program as we know it now:
• Businesses need to have been in business for more than one year. Clarity was not provided on acquisitions were a new FEIN was created in less than one year. Recommendation is to still apply.
• Use of funds: working capital for normal business expenses, including payroll
• The loan amount guidance is equal to 6 -9 months of GPM, initial feedback is the SBA is determining the loan amount and not the applicant
• Minimum FICO 570
• NO payments for 12 months
• Funds dispersed directly by SBA(US Treasury)
• Passive properties are eligible
• Non-For-Profit entities are eligible
• Applicants will receive a phone call from the SBA asking to verify their historical Revenues and COGS
• Tax Transcripts will be ordered, but the SBA will not wait to get them back before funding
• Loans up to $500,000 might not require much financial documentation
• Loan amounts greater than $500,000 will most likely be slower and require more documentation
• All available collateral, both business and personal, will have to be pledged until a 1:1 collateral coverage is obtained. The loan will still be made if a 1:1 collateral coverage is not achieved.
• All owners with a 20% or greater ownership interest in the entity will be required to guarantee the loan
• Loans in this program do not count towards a borrower’s available SBA guaranteed dollar limits
• Every state should now be on the approved EIDL list
• 30 year terms and amortization is being advised
• 3.75% interest rate on For Profit business loans and 2.75% interest rates on Non-For Profit loans
• Monthly payments will begin 12 months after the loan is funded, interest will accrue
• No fees or commissions of any kind
• Estimated Timeline: Historically EIDL loans took 21 days for credit decisions to be made by the SBA. The SBA then mails the loan docs to the applicant after approval. Applicants have up to 60 days to return signed loan docs to the SBA. The SBA will process and disburse funds into the applicants’ operating account in 3 to 5 days. These are historical timelines when this program was used for much smaller areas of the country and not the country as a whole. Anticipate the timeline will be longer.
• Application (SBA Form 5), completed and signed
• Tax Information Authorization (IRS Form 4506T), completed and signed by each applicant, each principal owning 20 percent or more of the applicant business, each general partner or managing member; and, for any owner who has greater than 50 percent ownership in an affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management
• Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business; an explanation if not available
• Personal Financial Statement (SBA Form 413) completed, signed, and dated by the applicant, each principal owning 20 percent or more of the applicant business, and each general partner or managing member
• Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used)
May be required:
• Complete copy, including all schedules, of the most recent Federal income tax return for each principal owning 20% or greater percentage of the business
• If the most recent Federal income tax return has not been filed, a year-end profit-and-loss statement and balance sheet for that tax year
• A current year-to-date profit-and-loss statement
• Additional Filing Requirements (SBA Form 1368) providing monthly sales figures for will generally be required when requesting an increase in the amount of economic injury.
SBA EIDL Links