Small Business Survival: Accessing SBA Loans
This article was written before Phase 3 of the CARE Act was published. Read more on this here.
There is a lot going around the media and it is hard to stay up to date. One of the hardest things as a business owner is getting access to good information. It is our intent as advisors to help our clients get access to this information and help them make informed decisions that help them improve their lives and businesses.
With COVID-19, I’m sure you have seen news about SBA loans, Relief Bills and FMLA information. Over the next few articles, we will summarize the latest information in a way that is digestible and easy to understand and therefore easier to put into practice in your own business. We will include links for a few resources throughout the article as well so you do not have to search the internet when you should be spending more time actually running your business.
Resource #1 – SBA Loan Assistance:
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. These could be “a vital lifeline for Texas small-business owners who are doing their best to adapt to these trying times” said Abbot in response to the U.S. Small Business Administration. Economic Injury Disaster Loans (EIDLs) can provide working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. These loans are intended to assist through the disaster recovery period. The interest rate is determined by formulas set by law and is fixed for the life of the loan. The maximum interest rate for this disaster is 3.75 percent. The law authorizes loan terms up to a maximum of 30 years. SBA will determine an appropriate installment payment based on the financial condition of each borrower, which in turn will determine the loan term. The law limits EIDLs to $2,000,000 for alleviating economic injury caused by the disaster. The actual amount of each loan is limited to the economic injury determined by SBA, less business interruption insurance and other recoveries up to the administrative lending limit. Loan processing should take between two and three weeks and the funds will be dispersed within a few days after the SBA receives signed loan closing documents. The state is encouraging small businesses to apply for the loans online to ensure a speedy process.
Other SBA Resources to Access Capital
SBA provides a number of loan resources for small businesses to utilize when operating their business. For more information on loans or how to connect with a lender, visit: https://www.sba.gov/funding-programs/loans.
How to get access to lending partners? SBA has developed Lender Match, a free online referral tool that connects small businesses with participating SBA-approved lenders within 48 hours.
- 7(a) programoffers loan amounts up to $5,000,000 and is an all-inclusive loan program deployed by lending partners for eligible small businesses within the U.S. States and its territories. The uses of proceeds include: working capital; expansion/renovation; new construction; purchase of land or buildings; purchase of equipment, fixtures; lease-hold improvements; refinancing debt for compelling reasons; seasonal line of credit; inventory; or starting a business.
- Expressloan program provides loans up to $350,000 for no more than 7 years with an option to revolve. There is a turnaround time of 36 hours for approval or denial of a completed application. The uses of proceeds are the same as the standard 7(a) loan.
- Community Advantage loan pilot program allows mission-based lenders to assist small businesses in underserved markets with a maximum loan size of $250,000. The uses of proceeds are the same as the standard 7(a) loan.
- 504loan program is designed to foster economic development and job creation and/or retention. The eligible use of proceeds is limited to the acquisition or eligible refinance of fixed assets.
- Microloanprogram involves making loans through nonprofit lending organizations to underserved markets. Authorized use of loan proceeds includes working capital, supplies, machinery & equipment, and fixtures (does not include real estate). The maximum loan amount is $50,000 with the average loan size of $14,000.
Local SBA Assistance
SBA works with a number of local partners to counsel, mentor, and train small businesses. The SBA has 68 District Offices, as well as support provided by its Resource Partners, such as SCORE offices, Women’s Business Centers, Small Business Development Centers and Veterans Business Outreach Centers. When faced with a business need, use the SBA’s Local Assistance Directory to locate the office nearest you.
Clark Boyd
Chief Operating Officer
PLEASE NOTE: This information is only a summary of what is included in the new legislation and resources available and should not be considered legal advice. If you are seeking to take action or contemplating action based on this information, please consult with a professional that will consider all relevant facts particular to your business.
