The SBA express bridge loans (EBL) allow small businesses with an established relationship with an SBA express lender to access a loan quickly. A loan could offer crucial economic support to your business. If you want to take your small business to the next level, the Small Business Loan Advisor can help you get there. We are a group of attorneys with one sole purpose, which is to make the process of acquiring an SBA Express Bridge Loan simple and straightforward for your business. By reviewing your loan application, we will ensure that you have filled the application correctly to increase your chance of getting the loan.

Terms of the Loan

A small business that currently has a business relationship with an SBA express lender can access up to $25,000 with minimal paperwork. This loan is an excellent option if your small business has an urgent need for cash. You may apply for an express bridge loan as you await approval for an Economic Injury Disaster Loan. If you currently have an SBA loan, but you require immediate capital, this loan would be an excellent option for you.

The rates for an EBL are the same as the rates for the SBA Express program. The rates could be either variable or fixed. The maximum interest rate is 6.5% + a prime rate. This rate is similar to the interest rates that commercial banks in the United States charge their creditworthy clients.

Other fees typically associated with the SBA express program will also apply to the Express bridge loan. You should engage your lender to find out about all the applicable charges for the loan. A lender may charge some additional fees, but the fees are limited. For instance, the lender may charge an application fee of 2% of your loan amount or $250, whichever is higher. If you fail to pay the loan within the agreed period, a late payment fee of up to 5% of the scheduled loan payment may apply. Other costs that may apply include reasonable direct costs of liquidation of your loan. The maximum repayment period for the loan is up to 7 years.

The SBA express bridge loan is a term loan and not a revolving line of credit. You do not require collateral to qualify for the loan. After qualifying for the Economic Injury Disaster Loan, you can pay your Express Bridge Loan in full. To apply for the Express Bridge Loan, you can contact your current SBA lender. You could also contact your local SBA District Office.

Understanding the SBA Express Bridge Loan Program

The U.S Small Business Administration (SBA) provides direct loan assistance to small businesses according to its authority outlined under the Small Business Act. Small businesses have to be located in areas or communities impacted by disasters. The SBA should declare the disasters under its authority; the disasters may also be presidentially declared. The announcement for the SBA express bridge loan pilot program was made through a notice published in the Federal register back on October 16, 2017. This program aims to supplement SBA's direct disaster loan capabilities. This program gave SBA a mandate to provide SBA-guaranteed bridge loans to small businesses. The loan is available to small businesses in areas affected by disasters. Small businesses can access bridge loans as they await long-term financing.

From March 25, 2020, there was an expansion of the SBA eligibility criteria for SBA bridge loans. All small businesses nationwide affected by the Coronavirus Disease would qualify for this loan product. On March 13, 2020, the United States President, Donald Trump, made an Emergency Declaration regarding COVID -19. The declaration covers all states, territories, and the District of Columbia. Therefore, all the small businesses in these areas, which have faced the negative impact of COVID-19, are eligible for the express bridge loan. The SBA extended the period of the express bridge loan pilot program to March 13, 2020.

Usually, express bridge loans are accessible up to six months after the date of the presidential disaster declaration. However, in the case of the COVID-19 emergency, the express bridge loans are available through March 13, 2021.

Eligibility of Small Businesses

For a business to qualify for the EBL, the business has to meet specific requirements:

  • The business must meet the definition of a small business. The business should not have more than 500 employees. However, this criterion of defining a small business may vary depending on the type of industry

  • The business should have been in existence as of March 13, 2020

  • The business should have faced the adverse effects of the COVIS-19 disease

  • As of March 13, 2020, the small business should have had an existing relationship with a lender who provides express bridge loans

In the case of Presidential Disaster Declarations, eligible small businesses must have been located in areas declared as primary disaster areas at the time of the presidential declaration. The businesses could also have been located in other contiguous counties.

In the case of COVID- 19 declaration, eligible small businesses should be located in any state, territory, or the District of Columbia. The COVID-19 pandemic has badly hit these areas.

At the time when the disaster in question commences, the small business must have been in operation. In addition to this, the small business must also meet the other applicable loan eligibility criteria.

Key Consideration by Lenders

When advancing the express bridge loans, the lenders have to make some critical considerations. For instance, lenders must note that the express bridge loans are not available for disasters declared by the SBA administrator. The same case applies to disasters declared by the Secretary of Commerce and the Secretary of Agriculture. For express bridge loan qualifications, the lender must confirm that the incident was a presidentially declared major disaster.

The lenders must also note the date of the issue of the presidential declaration. For every disaster declaration, there is an effective date. This date does not have to be the same as the date of the presidential declaration. Typically, lenders advance loans up to six months after the date of the presidential disaster declaration. Therefore, lenders must note the effective dates.

Lenders must also confirm that at the time of disaster declaration, small businesses were in operation. At the start date of the incident period, a small business must have been operational.

A small business applying for the express bridge loan must be within the primary area of the disaster or a contiguous county.

It is important to note that the requirements mentioned above vary in the case of the COVID-19 emergency declaration. Any small business located in an area adversely affected by the pandemic qualifies. This includes small businesses located in any state in the U.S, territory, or within the District of Columbia. The date of the applicable COVID-19 disaster is March 13, 2020. Therefore, a small business must have been operational at this date to qualify.

Other Requirements for SBA Express Bridge Loans

While advancing EBL, lenders have to follow laid down internal policies and procedures applicable to non-SBA guaranteed loans of similar size. In addition to eligibility requirements, SBA express bridge loan lenders must also be familiar with the eligibility criterion as outlined in the SBA loan program. The lender has a role in screening the applicants and ensuring they meet the requirements outlined by SBA. Some of the specific requirements for express business loans include:

Failure to Qualify for Credit Elsewhere

The SBA has in place "credit elsewhere requirements." This means that while applying for an express bridge loan, a small business must portray a dire need for credit. It should be evident that the small business cannot access the loan applied from other lenders on reasonable terms. It should be apparent that the business needs the SBA assistance. The lender has to address the applicant's need and desire for the express bridge loan. If a lender fails to carry out the necessary analysis, the SBA may deny guarantee and liability.

Small Business Location Requirement

This eligibility requirement will apply for disasters announced by the president. In the credit memorandum, the lender must outline that the loan applicant operates a business located in the area of the said disaster. The business must have been an operation at the time of disaster declaration. To verify the location and the existence of the business before the disaster, the lender may avail documents from its existing relationship with the borrower.

Adverse Impact Requirement

If a business is applying for an express bridge loan after experiencing the adverse effects of COVID-19, the lender must document specific facts in the credit memorandum. The lender must state that the small business was in existence before March 13, 2020. The lender must also outline the business suffered the negative impacts of COVIS-19.

Period after Declaration

The lender needs to determine the period after declaration; in most cases, express bridge loans are available within six months of a presidential declaration. However, in the case of the Coronavirus pandemic, the loans will be available up to one year after the presidential declaration of the pandemic.

Numerous/Multiple Loans

A small business may only be able to access one express bridge loan per disaster declaration.

Guaranty Percentage

The highest guaranty percentage for express bridge loans is the same as that of SBA express loans. The amount guaranteed will vary depending on the applicant’s maximum SBA exposure. The outstanding SBA loans to an applicant and its affiliates will also determine the guarantee level.

Maximum Maturity Term

As earlier outlined, the maturity term for the express bridge loan is seven years. However, upon approval for long-term disaster financing, the borrower may use the loan proceeds to pay the express bridge loan partially or fully. If the borrower fails to access the long-term disaster financing, the lender may allow a loan amortization exceeding seven years.

Sales in SBA’s Secondary Market

SBA is against the sale of express bridge loans in SBA's secondary market. The bridge loans are interim loans, and their sale in the secondary market would not be ideal for the proper operation of the market program.

Purpose of the Loan

If an express bridge loan is availed after a presidential disaster declaration, the proceeds of the loans should be entirely to enhance the operation, survival, and re-opening of small businesses within the eligible areas. The same case applies to loans advanced in the times of the COVID-19 emergency. The loans should be for the re-opening and survival of small businesses.

The lenders have a role in clarifying the purpose of an express bridge loan in the credit memorandum. This certification of the loan purpose must accompany a guarantee purchase request made to SBA.

For a presidential disaster declaration, the proceeds of the express bridge loan may be for working capital or any other purpose related to the disaster. For instance, the loan may be for purchase or replacement of machinery damaged during the disaster. The loan may also be for making repairs to damaged business premises and to purchase inventory. In the case of the COVID-19 pandemic, the purpose of the loan may be working capital.

Maximum Interest Rate

Regardless of the maturity of a loan, the interest for an SBA express bridge loan cannot exceed the allowable limit. A lender cannot charge beyond 6.5% above the prime rate. The lender is free to use the same base rate interest as for the same size non-SBA guaranteed loan as long as the lender stays within the allowable limit.

Loan Fees

Specific fees may apply to express bridge loans. The loan is subject to an upfront guarantee fee. At times, fee release initiatives may apply; lenders should refer to SBA notices for such initiatives.

An ongoing guaranty fee is also applicable, commonly known as the lender’s annual fee. All express bridge loans are subject to a lender’s service fee. Additional fees, which have a reasonable connection to an express bridge loan, may apply.

The lender has no mandate to impose fees or other direct costs to an express bridge loan applicant. However, a lender may charge an application fee not exceeding $250 or 2% of the loan, whichever is greater. Late payment fees should not exceed 5% of the scheduled loan payment. Reasonable liquidation costs may also apply to express bridge loans.

Prohibited Fees

Specific loan fees are illegal and should not apply to express bridge loans. The fees include loan packagers, brokers, or agents' fees. The lender or any other third party should not charge any other fee than the fees outlined above. Both the lender and the applicant do not need to pay a referral fee because of the existing banking relationship between them.

Credit Card Scores and SBA Express Business Loans

Lenders consider the credit score of the applicant while reviewing applications for SBS express bridge loans. Lenders consider the SBSS score. The calculation of the SBSS score depends on consumer credit data, application data, borrower financials, and data from the business bureau. The lowest acceptable SBSS score for an applicant is 130.

From time to time, SBA may decide to adjust the minimum allowable SBSS score. In the credit memorandum, the lender has to document the adequacy of the personal credit score.

The applicant must be tax compliant and must have filed the required tax returns to qualify for an EBL loan. A tax transcript from the IRS is required before any disbursement of the loan. The lender has to apply for the borrower's tax transcript from the IRS.

As outlined earlier, a banking relationship should exist between the applicant and the borrower. This existing relationship helps to mitigate any risks in the underwriting process. In the credit memorandum, it is a requirement for the lender to document this banking relationship. Some of the documents that can prove an existing relationship include a bank statement or any other relevant document that displays the applicant’s business address.

Getting the Right EBL Lender

For a lender to offer EBL loans, the lender should have a valid SBA form 2424. The lender should have had the form as at the disaster declaration date. In the case of COVID-19, the declaration date is March 13, 2020. You can only make the application to a lender with whom you had an existing business relationship. Therefore, you have to start by talking to your lender or bank to find out if they offer EBL loans.

Some of the forms that the applicant has to provide or complete include the borrower information form. The applicant must also provide an IRS transcript or its equivalent. The applicant should fill a disclosure agreement if the lender charges a loan application fee. The applicant has to fill form 601 if more than $10,000 of the loan will go to construction.

Find a Small Business Loan Advisor Near Me

You should get the first disbursement of your EBL loan within 45 days from the date of applying. The application should not go for more than 90 days without you receiving the money. Small Business Loan Advisor can help you do it right the first time and increase your chance of getting the loan on a timely basis. Contact us at 888-919-1210 and speak to one of our experts.