Good times in business are not always guaranteed. In times of a disaster or pandemic, for instance, so many companies suffer the loss of revenue. No one knows how long these tough times will last, and a business that is ill-prepared to face financial difficulties may suffer much, to the point of closing down. However, there is always help around, especially from the government, in its effort to keep businesses open for the future of the country's economy.
The Economic Injury Disaster Loan Program is among the programs that are available today, especially now that many businesses have been affected by the coronavirus pandemic. Companies that are suffering a temporary loss of income are urged to apply for these loans to keep their businesses in operation. At Small Business Loan Advisor, we have an excellent team of attorneys that will walk with you through the application process to ensure that you are getting the funds you need for your business. Get in touch with us today if you would like us to review your loan application.
Overview of the Economic Injury Disaster Loan Program
Natural disasters are among the things that significantly affect businesses in the United States. Some of the tragedies that have been experienced in the past include earthquakes and floods. These have affected not only many companies but also increased the costs for the government as well as individuals. The outbreak of coronavirus is, however, a more severe disaster that has proven to be costlier than all the other natural disasters the country has experienced in the past. The economic impact this pandemic has had on businesses is not only being felt in the United States but in the world at large.
The most affected in the business world are small business owners, who are among the major revenue contributors in the country. For that reason, the government has come up with a way to help these businesses keep their operations open amidst the revenue losses they are experiencing. The Economic Injury Disaster Loan has come at a time when so many companies are on the verge of closing up with no hope for opening up soon. However, with the loan advance, companies can now enjoy an economic relief that will enable them to cater for some of their financial needs as we wait for better times ahead.
The Economic Injury Disaster Loan from Small Business Administration is currently the primary form of financial assistance from the federal government. The program is meant to rebuild and repair disaster losses experienced in the private sector. The government believes that the money will help businesses meet the financial obligations that they could have achieved if the disaster had not occurred. It is also a form of financial relief from economic damage that has directly resulted from the pandemic. With this relief, businesses will be able to maintain a sound working capital throughout the period affected by the epidemic.
How to Qualify for the Economic Injury Disaster Loan
If you are living in a county that has reported several cases of coronavirus, you probably have been affected by the pandemic. To get financial relief from SBA, small business owners that are feeling the heat of this disaster are encouraged to send their applications. Particular factors will be considered, which will determine whether or not your business is eligible for the loan. Note that the government may not be able to offer financial assistance to all companies in the country, but only to the most affected. Some of the qualifications SBA will be watching out for include:
Your Business’ Location
The truth is that coronavirus has not affected all parts of the United States the same; some have reported just a few cases of the pandemic while others have more cases than they can handle. Your business must be located in a county where the disaster has been declared or in a contiguous county. It is the only sure way to tell that your business has suffered an economic injury as a result of the pandemic.
Proof of Economic Injury
SBA will also be interested in knowing how this disaster has affected your business. Those businesses that have been registering good sales in the past but are unable to meet their financial obligations at the moment may be considered. Note that the program is open to small businesses as well as non-profit-making organizations that have been severely affected by the disaster.
Businesses with Fewer Than 500 Employees
Another point to note is that this program is only open for businesses with less than 500 employees, including independent contractors, sole proprietorships, and self-employed individuals. These are the kinds of companies that probably do not make enough money to cater for their day-to-day operations and also save some for unexpected eventualities. The idea is to help such companies to provide some of those immediate financial obligations that they are not able to meet because of the pandemic.
If you meet these criteria and you would like to receive government funding to keep your business in operation, at least until these tough financial times are over, you are encouraged to prepare your documents and send in your applications. The money will be made available to the qualifying businesses within days after their applications have been received.
Requirements for SBA Approval
The number of businesses that have been affected by the coronavirus pandemic is high, which means that SBA is expecting to receive more applications than they can finance with the available funds. For that reason, you can expect the process to be a little complex than any other means of obtaining a conventional loan. There are several documents the business has to prepare in advance and include in their applications to improve their chances of getting the loan. You may also need assistance in ensuring that your application is made well and that all the documents are well-prepared for a better chance of qualifying for this funding. Some of the documents SBA will be looking for include:
Your Business’ Plan
Most loan lenders offering loans for business will only do so if served with a detailed business plan. A business plan is an essential document in that it informs the loan lender what your plans are regarding the management and growth of your business. Your loan lender will be interested to see the structure of your business, how it operated, and what the plans are in growing that business. Companies that have a solid plan for the future have higher chances of qualifying for funding than those that do not show any future plans. For that reason, having a detailed business plan is one way through which you can capture the attention of your lender.
The Amount of Money You Need
Business needs are different, and what you may need for your business may not be the same as what another person needs for their business. Some companies can cater to some of their needs during this period of the pandemic, while others are not able to provide for any of their financial obligations. It is essential to state the amount of money you need in your application and how you plan to use that money to grow your business. Note that the government is offering a fund of up to $10,000. Therefore, companies need to have their priorities right if they wish to qualify for this funding.
Your Business’ Credit History
The credit history of a business is one of the most critical factors that SBA considers before approving a loan. In cases of loans that require repayment, your credit history will determine the interest rate the lender will charge you for the loan. It will also determine the amount of money your business can be entrusted with. Most lenders will not agree on lending a small business that does not have a good credit history because of the risks involved. A good credit rating means that there is a chance of them getting back the money soon.
Industry Experience
This is determined by the length of time you have been in the industry, and how established your business is. A loan lender will want to know how long your company has been in operation, as this increases their confidence in lending you the money you need.
The Economic Injury Disaster Loan Terms
With so many businesses reducing their time of operation and others closing down entirely, there is a need to look into the future of the affected companies more so in this era of the coronavirus pandemic. For safety, most workers are staying at home, and this has led to significant financial losses in the business industry. The assistance being offered by the SBA through the Economic Injury Disaster Loan Program can go a long way in preventing business failure in the United States, something that is bound to happen if the pandemic lingers on for a much more extended period. It is essential to know the loan terms, though, to be well-prepared as you go through the application process:
The loan is a low-interest disaster loan that is being offered to eligible businesses that have been gravely impacted by the pandemic. A low-interest rate loan means that it is affordable to most companies when compared to other business loans small firms can access during this period. The most important thing is to ensure that you meet all the requirements stated above. There is a maximum of $2 million of funds available at the moments, with interest rates ranging between 2.75% and 3.75%. The amount of interest you will be charged is mainly dependent on your business type.
A business can apply for up to $10,000 of funding to help them pay their fixed debts, accounts payables, payroll, and other bills the company is unable to pay at the moment because of the pandemic's impact. The loans are offered with a long-term repayment, to make them even more affordable for small-scale business. It means that a company will have a maximum repayment period of up to 30 years if they qualify for funding.
Note that loan terms will be based on a case-to-case basis, depending mainly on a business’s ability to repay the loan. The SBA is giving the most affected companies an option to defer payment for the first year, though interests will still accrue during this period.
Businesses without any credit elsewhere will receive funding with an interest rate of 3.75%. The non-profit-making organizations will, on the other hand, receive funding at an interest rate of 2.75%.
The Application Process
If you feel that your business qualifies for the SBA-approved Economic Injury Disaster Loan, it may be time to put your application forward. There is a three-step process to go through to complete the form:
Step 1: Find out whether or not you are in a qualifying disaster area. SBA has been working with governors in all the states to check out how their areas have been affected by the coronavirus pandemic so they can be added to the list of the hardest-hit areas. If your county is already in the list of those affected, you may be eligible to benefit from the program. If not, you may have to keep checking and only proceed to apply for the funding once your area gets listed.
Step 2: Register and fill in an online application form that is easy and quick, then submit it to SBA. The application form is available on the SBA website. Ensure that you understand all the terms and conditions. Also, make sure that all the required information is submitted. Find out all the documents that will be required for the application and make sure that they are all ready when you are sending the request.
SBA has streamlined the online form to ensure that it is not taking business people more than 10 hours to submit their applications. The application starts with a section called disclosure, which gives precise details about the available funding and how SBA will use the information collected through the applications to determine business' eligibility. The disclosure section is followed by another part, whereby you will be required to fill in all your business' details. It is the longest section of the application, and all the parts are required.
That section is followed by another part, where the business owner is required to provide his/her details. It is in this section where you will state whether your business is sole-owned or jointly-owned. If jointly owned, SBA will require the personal information of the other owners. The kind of information needed here includes their full names, physical address, social security number, birthdate and birthplace, and citizenship. Additional information may be required, such as whether or not the owner or owners have any criminal charges against them.
Before submitting your application, ensure that you have indicated the amount of money you would like your business to be considered for. As mentioned above, the maximum amount of funding a company can get through this program is $10,000.
Step 3: Once everything has been submitted, you can regularly check your loan status on the SBA site, the same place where you registered your business. Generally, the turnaround is usually a month, though it could vary, especially with the high expected volume of applications. Note that the government may not be able to fund all the affected businesses at a go. Therefore, there is no guarantee that you will get the funding in the first month of your application. However, very needy companies will be highly considered.
Together with the application, the applicant will be required to provide an IRS form number 4506. The form will allow SBA access to your business’ tax returns. SBA will also be interested in your business’ credit history. However, this does not mean that the government is only interested in funding businesses with a spotless record. The only assurance SBA needs is that the company will be able to pay back the loan.
Note that online applications are the most recommended in this case when compared to paper applications. Other than being easy and quick to send, businesses will also be able to receive automatic updates on the status of their loans. If you are experiencing any issues in preparing your documents or presenting your applications, you can get in touch with the SBA customer service center for quick assistance.
Find a Small Business Loan Advisor Near Me
If your business has been affected by the current coronavirus disaster, it is essential to know that you may be eligible for government funding through the Economic Injury Disaster Loan program. At Small Business Loan Advisor, our attorneys will help determine your eligibility and take you through the application process to improve your chances of qualifying for the funding. If you have pending business bills that you may not be able to pay because of the effect the pandemic has had on your business, call us at 888-919-1210 from any part of the country. We will advise you and review your loan applications to ensure that everything is correctly filled in.
