Do You Qualify for an SBA Loan for the Coronavirus?

Amidst the coronavirus outbreak of 2020, the Small Business Administration (SBA) has announced several new initiatives to help support companies that are struggling financially during the pandemic.

Whether due to forced shutdown as a non-essential business or the impact of customers now forced to stay home, companies suffering lower sales or higher costs due to the coronavirus are being offered access to capital.

Disaster loan availability

The SBA's Economic Injury Disaster Loan (EIDL) program enables small businesses to apply for low-interest working capital loans of up to $2 million. Rates are 3.75% for small businesses and 2.75% for nonprofits with a 30-year term. The loans were made available to replace revenue lost due to social distancing measures the government has enacted.

"Disaster loans can provide vital economic assistance to small businesses to help overcome the temporary loss of revenue they are experiencing," said SBA Mid-Atlantic regional administrator Steve Bulger, who oversees SBA programs and services in Pennsylvania, Delaware, West Virginia, Virginia, Maryland and Washington, D.C.

Small businesses, generally considered those with fewer than 500 employees, and private nonprofits are eligible to apply. The key consideration is being able to demonstrate that the virus outbreak has impacted your ability to pay your bills (including payroll, accounts payable, lease, etc.). If you can illustrate your losses, you typically qualify.

While there are other factors, including creditworthiness and collateral, each application is considered on a case-by-case basis.

Who qualifies for an SBA loan?

"Small businesses, private nonprofit organizations of any size, small agricultural cooperatives and aquaculture enterprises financially impacted as a direct result of COVID-19 since Jan. 31, 2020, may qualify for (EIDL) of up to $2 million to help meet financial obligations which could have been met had the disaster not occurred," explains US Small Business Administrator Jovita Carranza. "These loans may be used to pay fixed debts, payroll, accounts payable, and other bills that can't be paid because of the disaster's impact."

The deadline to apply for an EIDL is Dec. 21, 2020.

Additionally, companies in need of immediate working capital can apply for an SBA Bridge Loan, and current borrowers have just been granted deferment of continued payments through the end of the year.

What to know about SBA bridge loans

The Express Bridge Loan Pilot program allows companies that already have a banking relationship with an SBA Express Lender to apply for up to $25,000 with little paperwork to slow the process.

In addition to helping to overcome the temporary loss of revenue, Express Bridge Loans can also be a stopgap for businesses in the process of applying for an Economic Injury Disaster Loan.

How to defer loan payments

Small businesses currently repaying SBA loans from previous disasters have also been given some relief, announced Carranza on Mar. 23, 2020, through an automatic deferment of loan repayment through Dec. 31, 2020.

"The SBA is looking at every option and taking every action to cut red tape to make it easier for small businesses to stay in business. Automatically deferring existing SBA disaster loans through the end of the year will help borrowers during this unprecedented time," said Carranza.

Payments on newly issued disaster loans due to the coronavirus will be deferred 12 months from issuance.

"The US Small Business Administration is the only federal agency designed specifically to help small businesses start, grow, and succeed. We not only provide much-needed capital and training for entrepreneurs, we are their voice in Washington. As the nation endures the coronavirus outbreak, we are seeing more, now than ever, that small businesses are the backbone of our economy," Carranza says.