SBA Economic Injury Disaster Loans

Coronavirus
CPA's
Certified Public Accountants

This article is very very closely follows an article I received from MBFA. It should be noted that this does not cover what the current Bill in Congress (as of 1:30 PM Eastern Time).

Pursuant to the latest guidance from the SBA, small businesses that meet the SBA’s revenue OR the number of employees criteria, small agricultural cooperatives, small businesses engaged in aquaculture, or private non-profit organizations located in declared-disaster areas may borrow up to $2 million in Economic Injury Disaster Loans (EIDL).

Loan applications will be reviewed by the SBA based on the extent of economic injury, and loans will be available to entities who do not have the financial ability to offset the adverse impact without hardship. The interest rate charged to for-profit businesses and private non-profit organizations will be 3.75% and 2.75%, respectively. These loans are offered with long-term repayment options of up to 30 years.  For loan amounts of more than $25,000, the SBA may require collateral.

Proceeds from EIDLs may be used for working capital purposes, such as paying for fixed debts, payroll, accounts payable, employee sick leave and other bills that cannot be paid due to the disaster’s impact.

Definition of a Small Business

Since EIDLs are available to small businesses, the SBA defines a “small business” as one that typically generates a maximum of $1.0 million – $41.5 million in annual revenue OR employs fewer than a range of 100 – 1,500 employees, depending on industry.  A full list of the small business size standards by NAICS Industry code, can be accessed here.

Entities can utilize the SBA Size Standards Tool to determine whether they qualify as a small business based on their three-year average revenue (including of affiliates) or the number of employees, depending on the industry they operate in.

Meeting the Criteria

The SBA requires the following initial documentation to process loan applications:

  • Business Loan Application (SBA Form 5) completed and signed by business applicant.
  • IRS Form 4506-T completed and signed by Applicant business, each principal owning 20% or more of the applicant business, each general partner or managing member and, for any owner who has more than a 50% ownership in an affiliate business (affiliates include business parent, subsidiaries, and/or 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.
  • Financial statements for the most recent three years and the most recent year-to-date financial statements to demonstrate economic injury. Financial statements do not have to be audited or reviewed.
  • Personal Financial Statement (SBA Form 413) completed, signed and dated by the applicant (if a sole proprietorship), each principal owning 20% or more of the applicant business, each general partner or managing member.
  • Additional information may be required by the processing loan officer at the SBA.

Once the information has been submitted, the SBA will prepare and send the Loan Closing Documents to the applicants for signature.  Once the signed Loan Closing Documents are received by the SBA, an initial disbursement in the amount of $25,000 will be made within 5 days (both for EIDLs and physical damage loans).

A case manager will be assigned to work with the applicant to help meet all loan conditions. They will also schedule subsequent disbursements until the applicants receive the full loan amount.

Loans may be adjusted after closing due to the applicants’ changing circumstances.

Revenue criteria

For the Disaster Loan Programs such as EIDL, annual receipts/revenues of an entity that has been in business for three or more completed fiscal years means the total receipts of the entity over its most recently completed three fiscal years divided by three. Annual receipts of an entity which has been in business for less than three complete fiscal years means the total receipts for the period the entity has been in business divided by the number of weeks in business, multiplied by 52. Where an entity has been in business three or more complete fiscal years but has a short year as one of the years within its period of measurement, annual receipts means the total receipts for the short year and the two full fiscal years divided by the total number of weeks in the short year and the two full fiscal years, multiplied by 52.

Entities applying for loans that are a part of controlled or affiliated group, must determine whether the size of the entire group or the applicant alone must be considered for eligibility purposes.  For EIDLs, applicants must satisfy the following two criteria:

  1. The size of the applicant alone (without affiliates) must not exceed the size standard designated for the industry in which the applicant is primarily engaged; and
  2. The size of the applicant combined with its affiliates must not exceed the size standard designated for either the primary industry of the applicant alone or the primary industry of the applicant and its affiliates, whichever is higher.

A full discussion of the SBA’s rules related affiliation can be found here.

Applying

Applicants may apply online, receive additional disaster assistance information and download applications at https://disasterloan.sba.gov/ela.

Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information on SBA disaster assistance.

Once you have registered through the link above, please gather these following initial documents or let us know if you need assistance, so we can complete the process efficiently:

  • Financial statements for 2017 – 2019 & YTD 2020
  • Tax Returns for 2017 – 2019
  • Personal financial statement or documents that include all assets and liabilities

If you help with this process, we may be able to help you. Please contact @ info@anchorbb.com or 561-376-7500.