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COVID-19 | 23rd March: SBA Loans and Emergency Disaster Assistance

The coronavirus pandemic has put unprecedented pressure on company cashflows – unlike anything seen in modern corporate history.

The US Small Business Administration, ‘SBA’, disaster loan programme is designed specifically to help those businesses suffering ‘substantial economic injury’ as a result of the Covid-19 outbreak.

Access to cash is the key determining factor on whether a business will be able to survive the coming weeks and months, and the SBA loan facility provides one such solution for those businesses who need short term financing in order to meet payroll, service debt, or to simply keep the lights on.

The SBA has historically provided access to financing for small businesses in order to help facility start-up or expansion, and have enjoyed key advantages over more traditional loan sources, and the disaster loan programme continues this theme;

  • Lower interest rates; typically 3.75% for small businesses (2.75% for non-profits)
  • Loans of up to $2,000,000
  • Longer repayment terms, up to a maximum of 30 years, meaning more affordable monthly repayments

The SBA loan is targeted at businesses that have under 500 employees.

The application is done online, and it’s highly recommended that businesses in need of financial assistance should apply immediately.

Current applications are seeing approval timescales of between two to three weeks, although ‘clear-cut’ applications are faster.

As with any lender, the SBA will review each case, and the following factors will aid an application;

  • Up to date company financials
  • A trading history of more than two years
  • Budgets or forecasts for 2020, or a cashflow plan that outlines the use of any loan monies

It is also worth noting that individual shareholders holding more than 20% of the company stock are personally liable, and for loans in excess of $350k, there may be liens put on business and personal assets.

For more information, please contact Gareth Jones or Chris Osborn directly.