Small Business Administration Provides COVID-19 Crisis Relief

If you are in need of low-interest federal loans for working capital for small businesses and nonprofits, the Small Business Administration is working to make disaster relief loans available in response to the COVID-19 crisis. To be eligible, your business must have fewer than 500 employees.

To apply for financial assistance, click here. You can also contact your Rea advisor, or complete the contact us form, with questions or for assistance.

$10K Emergency Funding Now Available

The CARES Act establishes an Emergency Grant to allow an eligible entity who has applied for a Disaster Loan due to COVID-19 to request an advance on that loan, $1,000 per employee up to $10,000, which the SBA must distribute within three days. Per the legislation, applicants are not required to repay advance payments, even if they are subsequently denied for a Disaster Loan. However, in advance of distributing the advance payment, it's the SBA's responsibility to verify that the entity is an eligible applicant for a Disaster Loan. Advance payments may be used to provide sick leave to employees, maintain payroll, meet increased costs to obtain material, make rent or mortgage payments and to repay obligations that cannot be met due to revenue losses. Further, the Act requires that an advance payment be considered when determining loan forgiveness if the applicant transfers into a loan made under the SBA's Paycheck Protection Program.

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IMPORTANT: Those who have applied for a Disaster Relief Loan prior to the CARES Act being signed into law MUST reapply at the SBA's new portal to receive the forgivable $10,000 loan advance.

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When Applying For A Disaster Loan, Have The Following Documents Handy

• • Electronic Loan App (Form 5 for business entities)
    • Must also include Form P-019 - for economic injury disaster loan supporting information.

While the following information isn't required to start the application but you may need it to continue the process later on.

• • Tax authorization (Form 4506-T) – each applicant and partner must submit a form for their individual and business taxes
    • 20% owners/GP/50% affiliate
  • Most recent business tax return must be uploaded
    • If 2019 is not available, then a balance sheet and P&L must be provided.
  • Personal Financial Statement (Form 413)
    • 20% of owners/GP
    • Can upload your own copy if you have one
    • If you have personal real estate, you must provide info such as an address, purchase price, date purchased, the current market value estimate
  • Schedule of liabilities (Form 2202)
  • Form 1368 – additional info – monthly sales figures – 3 years – total sales figures for each year should reconcile to the sales figures on your tax returns for the corresponding fiscal years.

What Are The Terms Of The Loan?

• • Initially loans were available up to $2M. However, effective April 14, 2020, these loans are being limited to $15,000 per applicant.
    • A loan processor will determine the loan amount. There is not a specified formula.
  • Interest rate 3.75%
  • The term is up to 30 years.
    • A loan processor will set the terms. The repayment term is based on the ability to pay.
  • Loans under $25,000 do not require collateral.
  • Loans greater than $25,000 require collateral – generally real estate – regardless if equity is available.
  • The loan will not be declined for lack of collateral but requires that the borrower pledge what is available.
  • Any loans less than $200,000 will not require a personal guarantee.

Helpful Tips When Applying for SBA's Disaster Relief Program

• • Apply online.
  • Write your password down. You cannot retrieve it electronically, we have heard that, in some cases, the call center personnel may not be able to retrieve it.
  • Do not rush through the application. Check and recheck the filing requirements to ensure that all the needed information is completed prior to submission. The biggest reason for delays in processing is due to missing information.
  • Use the same contact information (business name and the name of all owners) that you use on your federal tax returns. Double-check that they match.
  • If your tax returns reference other businesses that you own, you must also submit those tax returns in order to avoid a processing delay. If the entities are pass-through entities (LLC or S Corp), the individual owners may also need to provide personal financial statements if they own more than 20 percent.

When it comes to the timeline for processing the loan, please note the following information:

• It will take approximately 21 days to be approved for the loan. That being said, due to the high demand, it could take longer.
• It will take between 3-5 weeks to receive the funds you requested from the date you submit the application.
• Your first loan payment to the SBA can be deferred up to 11 months.

All this to say that the sooner you apply for an SBA disaster recovery loan, the better. In addition to seeking help from your Rea & Associates advisor, consider reaching out to small business development centers throughout Ohio. These organizations can provide you with excellent resources and insight as well.

Again, if you need assistance, please contact your Rea advisor directly. If you don't have an existing Rea contact, fill out our online contact us form.