The COVID-19 pandemic has hit small businesses particularly hard. And, the Small Business Administration’s disaster loan program can offer many of those small businesses a lifeline. But, it can be daunting to know what relief is available (and for what purpose), who qualifies, and how to apply. This is what you need to know.
The SBA has two types of disaster loan programs—one through banks and one directly from the SBA via the U.S. Treasury. Most small businesses will qualify for these programs if they have fewer than 100 employees, less than $50 million in revenue, and have been directly or indirectly impacted by COVID-19. There is no application fee, no obligation to accept the loan if approved, and no limitation on increasing or decreasing the requested loan amount during the application process. There are, however, closing costs involved if the loan is accepted.
Unsecured loans are capped at $25,000, but secured loans are available for up to $2,000,000 at 3.75 percent interest over 30 years (2.75 percent interest for non-profits). Applications are designed to be completed quickly and can be submitted online or by mail. Once the application is complete, a decision will be made within 21 days. If approved, funds generally will be released within 45 days of the application date. These funds then can be used to pay current obligations such as fixed debts, payroll, accounts payable, and other bills the business would have paid had the disaster not occurred. They cannot be used to recoup lost sales or profit or pay for expansion of the business.
Because of the disaster loan programs’ flexibility, interested small businesses should start the application process immediately. Contact a member of Spilman Thomas & Battle’s COVID-19 Task Force to learn if your small business qualifies and how to apply.