The Small Business Administration has created a coronavirus disaster loan program that allows up to $2 million of working capital loans. The loans are available to small businesses as well as some nonprofit organizations that have been directly and indirectly impacted by the coronavirus. Please note that these are not grants and do require repayment.

Qualifications

Location - The city or county in which the business operates must be officially declared a disaster area. The business must be physically located in the disaster area; P.O. boxes and customer locations do not count.

Loan Type – The SBA disaster loan program is offering working capital loans in the form of term loans, not a revolving line of credit. The working capital loans are designed to cover the following expenses:

  • Payroll
  • Rent
  • Utilities
  • Payments on existing loans
  • Other bills that are generally covered by the business

The loans cannot be used for:

  • Replacing profits
  • Replacing sales
  • Refinancing or consolidation of other debt
  • Company expansions

Loan Amount – The working capital loan program allows for loans up to $2 million. It is important to note that this is $2 million per company, not per person. For example, if an individual had 10 restaurants held under 10 separate legal entities, then each company would be eligible for its own loan application. In order to estimate the necessary loan amount, business owners should consider the short- and middle-term cash needs of the business. It is important to take into account the varying length of forecasts regarding the COVID-19 pandemic when estimating cash needs.

Interest Rates – Privately owned small businesses can qualify for loans with a 3.75% interest rate, while nonprofits are eligible for a 2.75% interest rate.

Collateral Requirements – Loans up to $25,000 are unsecured, whereas loans between $25,000 and $2 million may require collateral including buildings, equipment, and inventory. The loans are granted based upon the future ability to repay the loan in full.

Cost to Apply – There is no cost to apply for the SBA disaster loans and all origination fees for SBA loans have been temporarily waived.

What You’ll Need to Apply - As with any loan, credit worthiness may play into the loan approval process. Be sure to have a comprehensive set of financial information to submit with the application, including several years of past corporate tax returns as well as corporate income statements and balance sheets. Copies of bank statements may be required. For loan application for complex businesses, the Chamber of Commerce recommends consulting with your CPA.

Timeline – Loan application processing can take up to 30 days. Online applications will be processed quicker than paper applications.

Electronic applications can be found here: https://disasterloan.sba.gov/ela/Account/Login?ReturnUrl=%2Fela%2FLoanApplication%2FStartApplication

Paper applications can be downloaded and printed here: https://disasterloan.sba.gov/ela/Information/PaperForms

Additional Considerations

We recommend reaching out to your vendors, suppliers, and bankers to discuss what options may be available to you. For example, we understand that some banks have been offering loan payment forbearance while some vendors are offering steep discounts on their services to existing clients, only when asked.