If you’re a small-business owner who’s been affected by the COVID-19 pandemic, you can apply for an SBA Disaster Relief Loan. These loans will provide many small businesses with the coronavirus relief they need during this challenging economic period. You may be interested in an SBA Disaster Relief Loan because they have:
- Low fixed interest rates: 3.75%, or 2.75% for nonprofits
- Long-term repayment of up to 30 years
- No prepayment penalties
- Payments deferred (but interest accrues)
While we have gathered all the current information about these SBA Disaster Relief Loans from the most relevant SBA sources and materials, there is a chance that things could change. We will be doing our best to keep this page updated.
If you have any questions, please feel free to reach out to us.
Who Is Eligible To Apply For An SBA Disaster Relief Loan?
In order to apply:
- You must have a small business, cooperative, ESOP or tribal business with fewer than 500 employees
- You must be an individual who operates under a sole proprietorship, with or without employees, or as an independent contractor; or
- Have a private nonprofit or small agricultural cooperative
- Your business must be directly affected by COVID-19, meaning you are unable to pay your bills as a result of the pandemic
- Your business must have been in operation before February 1, 2020.
How Much Money Can I Ask For?
Your business may receive a loan for up to $2 million, but you could apply for less. The amount your business qualifies for will depend on “economic injury” factors, such as loss in revenue, payroll costs, rent payments, etc.
Where Can I Apply For An SBA Disaster Relief Loan?
What Is The Term Of The Loan?
Loans have a maximum term of 30 years. The SBA sets the installment payment amount and corresponding maturity based upon each borrower’s ability to repay.
Do You Have Any Information About The $10,000 Advance?
The CARES Act signed by President Trump on March 27 includes a $10,000 emergency advance, which will be provided after submission of your 7(b) application. The time-frame for the disbursement of the advance has not been set at this time.. The online application asks for your bank account information for the check to be direct-deposited. These advances do not need to be paid back.
Advances are meant to make an immediate impact on your business, allowing you to:
- Provide paid sick leave to employees who are unable to work due to the direct effect of COVID–19;
- Maintain payroll to retain employees during business disruptions or substantial slowdowns;
- Mitigate increased costs to obtain certain materials that may be unavailable from the applicant’s original source due to interruptions in supply chains;
- Make rent or mortgage payments; and
- Repay other obligations that cannot be met due to losses in income.
You should receive your advance more quickly than your SBA Disaster Relief Loan, because the verification process is not as demanding. Grants are based on self-certification and credit score only, allowing the process to go faster.
Is Collateral Required To Obtain An SBA Disaster Relief Loan?
No collateral is required for loans $25,000 and less. Collateral is required for loans greater than $25,000, but will not be filed on specific collateral. Instead, a blanket UCC-1 will be filed against all of your business collateral. Having no collateral will not be reason to deny your SBA Disaster Relief Loan.
What If I Don’t Have A Great Credit Score?
If you have credit problems, simply apply and include an explanation with your application. Guidelines for those who process SBA Disaster Relief Loan applications state:
“For disaster lending purposes, satisfactory credit history is defined as a history that generally shows payments to creditors as agreed unless otherwise justified …
Generally, a history that consists of minor, isolated instances of adverse credit or late payments is acceptable. Major instances of adverse credit such as unpaid judgments, repossessions, previous foreclosures, charge-offs, and unpaid collections can be overcome provided:
- The applicant explains the lapse; and
- The applicant has other accounts with ‘as agreed’ payment records.”
In addition, the guidelines state that loans can’t be recommended for approval if the credit history is deemed unsatisfactory, so there is no guarantee that your loan will be approved even under the outlined conditions.
What If I Have Been Through Bankruptcy?
Prior bankruptcy is not necessarily a reason for denial. If you have an older Chapter 7 bankruptcy, you may be able to qualify for an SBA Disaster Relief Loan, and even a more recent (within the last 2 years) bankruptcy may not hurt you, as long as you can show that circumstances were beyond your control and that you’ve been able to demonstrate good credit since.
If you’re currently in Chapter 11 bankruptcy, you may be eligible for the SBA Relief Program if your payment history has been satisfactory, but you will need to obtain written permission from the Bankruptcy Trustee. Businesses in Chapter 11 bankruptcy may or may not be eligible, but it may still be advisable to apply.
How Much Time Do I Have To Apply?
You may apply for small business coronavirus relief before the program ends on December 31, 2020. If you get turned down, you’ll need to reapply in 6 months.
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