Will You Qualify for the $367 Billion in SBA Loans for COVID-19?

Will You Qualify for the $367 Billion in SBA Loans for COVID-19?

Will You Qualify for the $367 Billion in SBA Loans for COVID-19?

Update: The President has signed the PPP Extension Act which extends the deadline to apply for PPP loans to August 8, 2020

The SBA Disaster Assistance bill (CARES Act) that includes $367 billion in low-interest SBA loans was voted on by the House of Representatives and signed by President Trump March 27, 2020. Subsequently, Congress authorized additional funding and passed the PPP Flexibility Act. For the latest developments, visit the Nav COVID-19 Resource Center.

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This is good news for small businesses all across the country.

What Does the Aid Bill Mean for Small Businesses?

The good news is that the amount of capital being made available to small businesses has increased from the original $50 billion called for by President Trump a couple of weeks ago to $367 billion to keep employees on the payroll who need to stay home or shelter in place (up to eight weeks of assistance for qualifying small businesses).

It also appears that small businesses will be able to defer their payroll taxes until 2021 or 2022.

The straight scoop is that this legislation is complex, the SBA loan guarantees will likely not be available immediately, (expect at least a few weeks), and the details of how the low-interest loans will be distributed is yet to be determined in detail. 

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The SBA has never been tasked with disaster relief of this scope, so loan guarantees that are to be distributed through the 7(a) loan program will be expanded to include other lenders determined by the SBA and the Secretary of the Treasury “…to have the necessary qualifications to process, close, disburse and service loans made with the guarantee of the Administration.”

Nav will be helping business owners apply for the SBA loans through our online portal and lenders like Nav’s partner SmartBiz, who already help business owners get SBA loans through the 7(a) program, will be working hard to get funds flowing as quickly as possible.

Today’s business owners have more loan financing options than ever before, with online lenders competing with traditional loans to get your business. Take the decision-making process seriously: having working capital can help your business, but only if you use the funds wisely and have a plan for paying back the loan.

Who Is Eligible?

The devil is often in the details, so it will be critical for every small business owner to understand the scope of the loan guarantee program and what the qualification criteria will include.

The qualifying criteria for small businesses applying for the financing will see some changes and could differ depending on your SBA lender:

  • Businesses with fewer than 500 employees (with some exceptions)
  • Businesses that were in operation on or before February 15, 2020
  • Businesses that meet the SBA’s industry-based size standard requirements for the applicable NAICS code, which are based either on number of employees or annual receipts (you can see if your business credit reports list your NAICS code by pulling your business credit reports for free on Nav)
  • Not-for-profits (except those receiving Medicaid funds)
  • Veterans organizations

A business applying for the assistance will need to demonstrate that they had employees and were making payroll prior to February 15th with payroll receipts and other financial records.

Franchises and hospitality businesses (NAICS code 72) with multiple locations, even if they have more than 500 employees, may be exempted on a per location basis as well as any businesses receiving financial assistance from a Small Business Investment Company (SBIC).

How Much Can You Apply For? 

The maximum loan amount will be the lesser of $10 million and 2.5 times the average monthly payroll costs for the one year period before the loan is made, with consideration for any seasonality-based adjustments or a shorter period for businesses less than a year old.

The maximum loan amount for an SBA Express Loan has been raised from $350,000 to $1 million through December 30, 2020. In 2021 the maximum loan amount will drop back to $350,000.

Fees for Veterans applying for a 7(a) Express Loan are permanently waived.

The maximum loan term will be up to 10 years and the Secretary of the Treasury, in consultation with the SBA, will set guidance on interest rates and other terms and conditions of the program. Currently, interest rates are negotiated between the SBA lender and the borrower, based upon the Prime Rate or the SBA Peg Rate with a cap. 

Interest payments will be deferred for the period of one year.

These loans are eligible for forgiveness, but the details here are important to understand so you don’t find your business in trouble.

The loan will be eligible for forgiveness in an amount (not to exceed the principal amount of the loan) equal to the sum of: (i) payroll costs, (ii)rent, (iii) utilities payments, and (iv) interest payments on secured debt obligations (including mortgages) incurred in the ordinary course of business prior to February 15, 2020, in each case, paid during the eight-week period commencing on the date of origination of the loan. The amount of loan forgiveness will be reduced by any reductions in employee wages (in excess of 25% for any employee) or a reduction in the number of employees during the covered period in accordance with the terms of the program. Borrowers will not recognize any cancellation of indebtedness income upon forgiveness of any portion of the loan for tax purposes. A borrower will be required to submit a fulsome application in support of loan forgiveness directly to the lender. The lender will make a determination on the application (subject to a statutory safe harbor) within 60 days of receipt; within 90 days after the loan forgiveness amount has been determined, the SBA will reimburse the lender directly for the principal amount of any forgiven debt, plus interest accrued through the date of repayment. SBA will issue additional implementation guidance and regulations regarding the loan forgiveness process within 30 days after enactment of the CARES Act.

In other words, there are conditions for which some loan forgiveness is available, but don’t assume forgiveness is automatic and any forgiveness (if available) will be based upon factors like your payroll costs, rent, utilities, and interest payments on debts you had previous to receiving the aid—and will go through a review with the lender.

Canceled indebtedness will not be included in the borrower’s taxable income.

Loan proceeds do have some restrictions. Payroll, rent, utilities, and sick leave are among the approved uses for the funds. They may also be used to make interest payments on other debt that was incurred before the February 15, 2020 deadline.

The loans will be unsecured and will not require a personal guarantee. This is great news for business owners who lack collateral and also may have a subpar personal credit score that may have precluded them from low-interest SBA loans in the past.

The deadline for applying is June 30, 2020.

The loans covered in this bill will be treated differently than the Economic Injury Disaster Loans, including a Grant for those who apply for the disaster loans.

The Economic Injury Disaster bill establishes an Emergency Grant to allow eligible businesses that apply for an Economic Injury Disaster Loan (EDIL loan) to request an advance on that loan, of not more than $10,000, which the SBA must distribute within 3 days. The SBA will not require applicants to repay any advance payments, even if they subsequently are denied an EIDL loan.

In other words, small businesses that are eligible to apply for the Economic Injury Disaster Loan will be able, within 3 days, to access up to $10,000 without a requirement to make payment, even if their disaster loan application is denied.

The Emergency EIDL Grants will terminate on December 30, 2020.

You can learn more on how to apply for those here

What If You Need Funding Faster?

If you need access to capital before these funds become available, there are options for creditworthy borrowers.

Disaster Relief Already Allocated

Congress has already allocated $8.3 billion to assist small businesses battling the coronavirus as part of an emergency spending package that was passed on March 4. New, relaxed criteria is designed to encourage:

  1. A faster and easier qualification process for states seeking SBA disaster assistance: The new criteria requires states or territories to certify that at least five small businesses have suffered economic injury, regardless of where the businesses are located. The previous requirement was more restrictive based on the county/parish.
  2. Expanded, statewide access to the Disaster Assistance loans for small businesses: Under the revised criteria, the assistance will be available statewide following the economic injury declaration and will apply to current and future declarations related to the coronavirus. Previously these declarations would have only been available within counties identified by a Governor.

Nav’s Education Director Gerri Detweiler is in close touch with SBA officials and applications for these disaster loans are already flooding into the SBA. The sooner you can get your own application in, the faster you’ll be “in line” to have your application approved. We strongly urge you to get in line, even if you don’t need the funds once your application comes up for review.

If you would like more information, you can contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or email to disastercustomerservice@sba.gov.

0% APR Business Credit Cards

If you need access to capital quickly, a business credit card can be a good option. Especially given the recent cuts to the Prime Rate by the Federal Reserve, which means credit card APRs will likely lower in the next few weeks. 

See How Much SBA Loan Money You Qualify For

See How Much SBA Loan Money You Qualify For

Use our CARES Act SBA loan calculator to see how much money your business may qualify to get.

Use the Calculator

However, issuers are beginning to update lending restrictions and tighten and even close new applications for some business credit cards. There are still some issuers approving customers for 0% APR business credit cards that could help your business access needed capital to meet budget shortfalls during the health crisis. MatchFactor users were more than 3x more likely to qualify for a business credit card — you can sign up for Nav for free to get matched today, with all the up-to-date lending restrictions that we’re updating in real time.

A Business Line of Credit

A business line of credit is a time-tested way for a small business to have quick access to cash to meet an unanticipated need. The upside of a line of credit is you pay for what you borrow, but know the full line is available if you need it — a good option for business owners who haven’t been hit yet, but want to be prepared nonetheless. 

If you already have a line of credit, Nav is already talking with customers who have seen their total credit lines cut, so we encourage you to take a draw now before the funds are unavailable. This is a precaution, and one we wouldn’t normally recommend if we didn’t anticipate continued tightening among business lenders.

A Business Term Loan

The short applications and quick decision-making make it easier than ever for a small business to apply for an online term loan. An application can often be completed in a matter of minutes with an answer in 24 hours or less. What’s more, funds can be electronically deposited in your account within days. While many of these lenders have ceased lending in the past few days, some are already re-opening for applications.

Feel free to reach out to one of our credit and lending specialists today and we will gladly answer questions and help you find the right solution to help you weather the storm. 

As lenders change their credit requirements to adjust to the current conditions caused by the coronavirus, we can help you evaluate your options and make decisions about what your short-term options are and help you prepare to apply for the SBA loan program.

Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.

This article was originally written on March 12, 2020 and updated on November 13, 2020.

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ABOUT AUTHOR

Ty Kiisel

Ty Kiisel is a Main Street business advocate, author, and marketing veteran with over 30 years in the trenches writing about small business and small business financing. His mission at Nav is to make the maze of small business financing accessible by weaving personal experiences and other relevant anecdotes into a regular discussion of one of the biggest challenges facing small business owners today.

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48 responses to “Will You Qualify for the $367 Billion in SBA Loans for COVID-19?

  1. I’m a truck driver with my own trucking company working as a self contractor I’m looking into applying for the app loan but cant find anything out about the interest rates or if they are interest free help please

  2. Hello,
    I’m a Realtor and and sales are way down due to Covid-19. I need to get a SBA/ EIDL loan… Please help. I also need to get unemployment as I haven’t seen a pay check for a while now. I need information that will walk me through the process.

    Thanks in advance

  3. Question….some businesses weren’t able to secure a loan before money ran out. However, I am personally aware of a business (fast food) that has flourished during the pandemic and secured a loan and the owner has bragged that he will not have to pay it back. How can this be? This owner is a millionaire and his business hasn’t been interrupted at all.

  4. Hi. I applied over a week ago but hv recvd no correspondence. Id like to check the status. Is there a way to do that?

  5. I want to know how the gov plan to help Hair Salon & Barber Shops being that we were ordered to close. For most of us it our only source of income. We need help.

  6. I own a small business and have only 1 employ and rest on 1099. monthly payroll about 18K also rent utility about 11k. Most f my guys are not working at this time. How ever rent utility are killing us. Do I qualify?

    1. Unfortunately you can’t apply for PPP based on payments to 1099 contractors. You may need to apply for both EIDL and PPP for different purposes. (Assuming they get more funding for these programs which will hopefully happen this week.)

  7. Dear Sirs. I am a self employed individual. Have been this for 40 yrs. Have been thru terrible tornados, facility changes and now my work has stopped again. This all has happened in 9 years. I have an airb&b, I work for the public school system and travel to speak to church groups. All these have stopped. I could use the $10,000 now and assistance on going. Please give consideration to our dilemma. We are losing $40,000. Thx you.

  8. I Work on a committee overseeing operations of casino. We have applied for the loan, but I keep reading that casinos do not quality for this loan, can you explain why? Or if this is just a rumor going around in the media??

    1. Alice – the SBA Standard Operating Procedures have traditionally prohibited lending to certain types of businesses such as pyramid schemes and certain gambling concerns. You’ll find those on page 107 of the SOP: https://www.sba.gov/sites/default/files/2019-02/SOP%2050%2010%205%28K%29%20FINAL%202.15.19%20SECURED%20copy%20paste.pdf I haven’t seen an exemption for that requirement but you should consult with legal counsel to determine if you may qualify.

  9. No one can answer questions concerning LLC companies eligibility for small business loans or if they qualify for any stimulus help. Racing and NASCAR will not run again until july. This is a real hardship for small engine builders. Racing ends in November 2019 and starts backup in February 2020. Can someone answer if there is any help?

  10. We own a business and I am the sole employee. We filled out the form, which was a little awkward to fit all the questions to my business. I do qualify with salary, rent and utilities etc.
    We got a number when we submitted but that was Wed afternoon. We have heard nothing else nor has any money passed.
    We were looking for the flat 10k a d filled it out on line. Dose this sound correct to you?

  11. Hello, I have a small business and have seven workers. I give them 1099. Do I qualify for the Paycheck Protection Program?

  12. Hay i am waiting on y’all to email me my application out my company is own by me only and it is a disable Veteran company.

    1. Mr. Allen,

      I didn’t want to publish your personal information so I took it out. What did you apply for? EIDL or PPL? If you applied for the Disaster Loan at SBA.gov then I’d recommend you contact them directly as we have no way to access that. If you applied for the Paycheck Protection Program loan through Nav we will email you as loans become available through our lending partners.

  13. I didn’t find any help on how to apply for the codv19 grants or loans I have a small deli and have lost plenty revenue. I ‘m not sure what I qualify for, I have less than five people who work in the deli with me primary on a stipend am I eligible for this and how do I know what I am eligible for.

  14. As the business owner, I did not pay myself last year, therefore no “payroll”. I only took draws as a sole proprietor. So, if I have no payroll to account for will I still be able to apply?

    Thanks!

    1. Sheryl, the bill is still in Congress. Once the final bill is signed by the President, we’ll update with how to apply. In the meantime, the Economic Injury Disaster Loan is available, here’s the information on how to apply for that:

      The SBA has since taken the portal down to fix the issue and recommended businesses fill out a PDF application and upload it to submit instead. Right now, the SBA is asking borrowers to fill out the following forms immediately:

      Disaster Business Loan Application (SBA Form 5) or the Disaster Home/Sole Proprietor Loan Application (SBA Form 5C)
      Economic Injury Disaster Loan Supporting Information (Form P-019)

      You’ll then upload those completed forms to the SBA Economic Injury Disaster Loan website. You may be asked to fill out additional forms later.

    2. I have a kiosk in a mall and pay about 20000 a year I show very little however I have a lease that must be paid so although I have no employees and show little does my rent quaility me??

      1. If you were in business on February 15, 2020 you should be eligible to apply. We can help you if you start your application at Nav.com on the homepage.

    3. If I have a 28k tax lien “that I can pay” will the SBA underwrite the loan if everything else is good to go and list “pay of existing lien” as an underwriting condition or just kick it out and decline my EIDL or PPP loan application?

      1. I would talk to the SBA Disaster Assistance hotline to clarify your question. An outstanding federal tax lien could result in a decline so ask them what you need to do to maintain eligibility. (You may be able to get on a payment plan for example and then apply.)

    1. Hi Erum,

      Yes, you don’t have to have employees to apply for the loan once it is available. There are some restrictions on how you use the money though. they are listed in the article.

  15. Ty, I heard last night that the SBA loan program can be eventually converted into a grant by the US government if you maintain your employees during and for a period after the pandemic disaster. Is that true that I could use this as a lost revenue loan that may eventually be forgiven by the US govt? Why doesn’t the US govt just back the insurance underwriters so all small business can collect lost revenue through their commercial insurance package? That would be so simple for everyone.

    1. Hi Bud, thanks for reaching out. The original $8.3 billion that is in play right now does not include that in the legislation. Sen Rubio’s bill is still in the Senate and as I’m reading the bill, I don’t see that yet. I think we need to wait and see if any of the funding will convert to a grant at some time in the future. I would not count on that contingency until it is officially announced.

  16. Where’s the SBA loans for small businesses in MN. The state has closed our doors for business but I do not see where we can apply for disaster relief. I see it for the major states.