How to Apply for SBA Disaster Loans for Coronavirus
Apply for an SBA Loan with the Help of Simple Startup
As preventative measures are put in place to stop the spread of coronavirus across the nation, many of our clients are becoming increasingly concerned about the economic impact the crisis could have on their small businesses.
If you own a startup or small business, you have a right to be concerned. The pandemic is being referred to in financial circles as a “Black Swan” — a rare occurrence with the potential to have a huge impact on economic activity around the world.
The businesses being hit hardest right now are travel companies like airlines and cruise lines, along with restaurants, bars, and event promoters. As time goes on, more businesses are likely to feel the crunch as consumers spend less and less money.
As many of the industries listed above earn drastically less and are forced to scale down, their employees make less. Those employees then spend less on a whole slew of other industries, which affects those industries’ employees accordingly. The cycle drags on.
Even after the coronavirus crisis has passed, it may take a while for things to work their way back to normal.
At the time we are writing this, news reports indicate a massive government injection of money into the economy coming soon, including money sent to small businesses, a pause on payroll taxes, and maybe even checks sent directly to Americans.
While these policies can help business owners and employees alike, right now the future remains uncertain for both.
Fortunately, it’s not all doom and gloom for small business owners. The Small Business Administration (SBA) has just announced a new class of disaster relief loans specifically for small businesses impacted by COVID-19 (coronavirus).
What Exactly Do Coronavirus SBA Loans Look Like?
The federal government has declared a national emergency in response to coronavirus. In accordance with the announcement, the SBA’s Disaster Relief Program has established disaster assistance in the form of low-interest loans.
The SBA calls these Economic Injury Disaster Loans, and they can be for as much as $2 million each.
Interest rates are 3.75% for small businesses (and 2.75% for non-profits). They also come with long-term repayment plans — up to 30 years if needed.
These specific Small Business Administration loans are for businesses who have been negatively impacted by the pandemic and/or the measures being taken to prevent its spread.
This could include staff getting ill, but it’s more likely for those businesses who have seen a drastic cut in sales due to social distancing or government policies requiring them to close their doors.
What Can You Use an SBA Economic Injury Disaster Loan For?
The loan money is to be used for working capital to help certain businesses weather the crisis.
Appropriate uses of the loan money include:
- Debt payments
- Accounts payable (vendors, suppliers, and other service providers)
- Paying other bills that can’t be met due to the coronavirus crisis
Which Businesses Are Eligible for the SBA’s Coronavirus Loans?
There are two basic requirements for eligibility for the SBA’s coronavirus loans:
- You have to actually be what the government defines as a small business, and
- Your business’ geographic location.
Starting with requirement #1: unfortunately there is no cut and dry definition for what constitutes a small business. It’s based on the number of employees you have, your annual receipts, and more. On top of that, the standards vary depending on your industry.
Instead of us trying to explain all of that here, we’ll direct you to the SBA’s website where you can measure your business to determine if you qualify as a small business. Visit the SBA’s “Size Standards” page here »
Before you do that, though, you should read up on the second requirement: your business’ geographic location.
Only small businesses in select counties in certain states are eligible for these loans. But we expect the list of eligible locations to broaden notably in the coming days and weeks.
How to Apply for an Economic Injury Disaster Loan from the SBA
Eligible businesses seeking disaster assistance from the SBA can apply at: disasterloan.sba.gov/ela
You’ll need to set up an account and then go through their 3-step process.
One note: Be sure to select “Economic Injury” for the nature of your business losses — this is simply what they’re asking to keep applications clearly organized.
How Long Will It Take to Get Disaster Assistance?
It’s not clear exactly how long it will take the SBA to process these requests. The SBA and federal government are working as quickly as possible to get aid to businesses that need it.
As a gauge, previous SBA loans typically took 60-90 days to process. However, we’re really hoping the federal government can allocate resources accordingly to ensure these disaster relief loans are processed much faster than usual.
What Else Can You Do to Protect Your Business During this Crisis?
Simple Startup is dedicated to helping all our clients with their financial planning and growth strategies, no matter what curve balls come their way.
During a crisis like the one we face with the coronavirus, that means figuring out how to manage the economic hits and protect businesses from suffering losses that they can’t recover from.
Beyond applying for loans that your business may be eligible for, the most important thing right now is to start prepping for a months-long downturn in revenue.
In the coming weeks, we’ll be releasing our professional guides on how to weather the economic impact of the coronavirus crisis, and more tips on how to continue to build your business, even when everyone is working from home.
For now, one of the best ways to make the most of this downtime is to educate yourself. Our Simple Startup Academy offers entrepreneurs affordable and approachable online courses on financial modeling, budgeting, and more.