Navigating the SBA Economic Injury Disaster Loan Program Application Process

by Peter Barton

For the latest developments with SBA Loan programs, or other immediately available funds, continue to monitor our COVID-19 Resource Center.

Updated March 24, 2020

In the latest news regarding SBA disaster loans, we received more details from representatives at the SBA on Monday, March 23, 2020. Here are the pertinent details for most applicants:

  • All 50 states and 6 territories qualify for economic injury disaster loans; this is the only direct federal loan program.
  • First loan approvals occurred late last week.
  • $2 million in loans (with authority to go higher) are available to meet working capital and normal expense needs – this is NOT meant to replace lost profits.
  • Loans are NOT meant to refinance long-term debt.
  • The agency has relaxed its standards for “credit available elsewhere.”
      • SBA recognizes this is an unprecedented economic event and has the right to waive this requirement.
  • Automatic 1 year deferment on first payment to allow business to get back to normal.
  • The applicant must prove the ability to re-pay the loan as part of the underwriting analysis.
  • The business is NOT obligated to accept the funds, there is a 60 day window (likely to be extended) to execute documents.
  • Applicant will self-certify that their business is “small.”
  • There is no early payoff penalty.

March 23, 2020

As with any new legislation or program, companies are trying to understand the impact to them and their employees. The Small Business Association (SBA) Economic Injury Disaster Loan Program and the application process are no different. The SBA is already being flooded with questions and subsequently will be flooded with loan applications. Incomplete applications will not be accepted and may delay critical funding for companies. We want to proactively provide the requirements, so you can efficiently gather the requested information. Before an application is started, confirm your business qualifies per SBA’s table of small business size standards, which is usually stated in number of employees or average annual receipts. The definition of “small” varies by industry. A delay due to missing or inadequate information can be a major setback. Elliott Davis can assist in preparing, gathering, and facilitating the information required to populate your application. Please let us know how we can help.

For businesses larger than these standards, guidance will be available shortly and posted to Elliott Davis’s COVID-19 Resources page

Here’s what we know about the loan application process for qualified businesses:

Paper forms can be found using the following link: The SBA prefers you submit your application electronically, however, the paper forms are helpful to have an understanding for the type of information that’s being requested.

  • SBA Form 5 – SBA Form 5 generally pertains to basic personal and business information (e.g. names, locations, ownership).
  • SBA Form 159D
    • Required as part of the application if an “Agent” receives compensation from the applicant for activities directly connected to the application process. Please see definition per Form 159D: “Agent” includes a loan packager, accountant, attorney, consultant, engineer, architect, appraiser, or any other party that receives compensation from representing an Applicant for an SBA disaster loan.
    • If compensation exceeds $2,500, the Agent must provide a separate schedule itemizing 1) services performed, and 2) the hourly rate and number of hours billed for that service.
  • SBA Form 1368
    • Used to establish that the claimed economic injury is substantial and is a direct result of the declared disaster.
    • Applicant must provide monthly sales figures beginning 3 years prior to the disaster and continuing through the most recent month available. Figures need to reconcile to tax returns for the corresponding years.
    • There is an optional section for the applicant to provide a financial forecast to illustrate the affect to income and expenses for the business during the disaster until normal operations resume.
    • Anticipated sales, cost of goods sold, and operating expenses are requested.
    • An open section is provided to include additional narrative or financial information to help establish the economic loss.
  • SBA Form 413D
    • Personal financial information for owners, general partners, managing members, or each owner of 20% or more of the equity is required for underwriting purposes.
    • To ensure completeness each business partner must provide this information, including an owner’s spouse and minor children, should they hold equity greater than 20%.
  • IRS Form 4506-T
    • SBA requires transcripts of tax returns. The form can be completed online but the applicant must print and sign the form, then submit to the SBA.
    • Each party required to fill out form 413D above must provide tax transcripts and complete IRS Form 4506-T as well.
    • Instructions for IRS Form 4506-T
  • SBA Form 2202
    • Applicants may use their own schedule as long as it contains the required information, however SBA Form 22020 provides a suggested format for the Schedule of Liabilities.
    • Instructions for SBA Form 2202
We can help

If your organization needs support with the SBA loan application process, Elliott Davis can assist you in preparing, gathering, and facilitating the information required to populate your application. We have a team of experts with the practical experience and expertise necessary to help keep your business moving forward. Contact a member of the Elliott Davis team or fill out the form below.

For more helpful tax updates and business continuity resources to navigate COVID-19, visit the Elliott Davis COVID-19 Resource Center

 

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