The Small Business Administration (SBA) announced recently that it would offer economic injury disaster loans, but a presidential declaration could simplify the process for small businesses seeking loans up to $2 million. Important details about the SBA Disaster Loan program include:
- Businesses can service their conventional long-term debt payments with the disaster relief program. If existing debt is an SBA loan or government debt it cannot be financed. This relief would need to take place in the form of a loan deferment up to 90 days or 6 months depending on the lender and their requirements.
- Businesses with regular bank financed long term debt and a separate existing SBA loan are not precluded from qualifying for the SBA disaster loan. The SBA portion would need to be deferred, however the conventional debt can be included in the disaster relief.
- The SBA Business interruption loan pending in the Senate now is different than the SBA disaster loan. Information will be forthcoming once pending legislation is passed.
- The SBA disaster loan is eligible for both Regular Businesses and Non-Profits.
- Non-Profit loan rate is 2.75% For Profit 3.75% loan rate.
- These new loans are immediately eligible for 1 year of deferred payments.
- Through the application process the business will have to prove their loss and hardship. Final approval amount is determined by the SBA.
- This is not a 504 or 7A loan (traditional SBA loan). It is considered separate.
- Any loan over $25,000 – the SBA is looking to take as much collateral as possible including personal residence. Anything under requires personal guarantee.
- Deferment may be offered by your lender for current SBA customers for up to 90 – 180 days.
- These loans are designed to support business as hardship loans. They are not designed to refinance or consolidate current loans. If businesses have conventional loans, they are eligible to finance payments needed for those loans. If they currently have SBA loans, they would be ineligible. SBA loans would need to be supported via deferment.
- If they want to refinance their current conventional debt and extend the terms via SBA that would still be a 7A or 504 typical SBA Loan.
- Missing Information is the biggest cause of delay in getting loan approved, denied, or asking to resubmit.
- Current Term time is estimated to be at 30 days. This could extend as volume increases.
- Debt Service Coverage Requirement has not been specified and is on case by case basis.
U.S. Small Business Administration Disaster Loans
Kentucky Governor Beshear announced the state has qualified for U.S. Small Business Administration Disaster Loan Assistance. With that certification now in place, small businesses, for-profit contractors and private non-profits anywhere in Kentucky that have been harmed by the COVID-19 pandemic are eligible to apply for low-interest SBA Economic Injury Disaster Loans. www.sba.gov/disaster
For more information on how small businesses can plan for and react to the COVID-19 Pandemic, visit the SBA’s Coronavirus (COVID-19): Small Business Guidance & Loan Resources here.
For more information on the SBA’s disaster assistance funding programs visit the SBA website here.
Special thanks to John Walters, Vice President | Senior SBA Business Development Officer with First Commonwealth Bank for providing the SBA information.
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