How Makers Can Apply for SBA Disaster Loans
A quick note: This article was published very early in the COVID crisis and is now out of date. Due to rapid changes in funding deployment and guidelines, we recommend that you call your local SBDC to learn about current local funding opportunities. https://americassbdc.org/small-business-consulting-and-training/find-your-sbdc/
You may have heard the headlines that millions of dollars are being routed to small businesses to help them navigate COVID-19 related financial insecurity.
One form that financial support is taking are SBA Disaster Assistance Loans, which are available to any small business in the US (more on the specifics around that, below) — including makers and handmade businesses.
Background on the SBA
The U.S. Small Business Administration (SBA) is an independent agency of the federal government. The SBA empowers and advocates for entrepreneurs and small business owners by providing free counseling, financial assistance, and even government representation if necessary. Interestingly enough, the SBA was actually created in 1953 as a response to the economic fallout from World War II and The Great Depression.
Given our current circumstances as we navigate our business amid a global pandemic, the foundation of the agency has prepared for this very kind of national crisis.
The SBA Loans available for small business
What does this mean for you?
Last week, the SBA announced that they are offering Disaster Assistance Loans to small businesses that have been severely impacted by COVID-19. If you go through the application process and are eligible to receive aid, this could be the answer you’re looking for to help you overcome this (hopefully) temporary loss of revenue.
Small business owners in the following designated states are currently eligible to apply for a loan due to Coronavirus (COVID-19): California, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Indiana, Maine, Massachusetts, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Oregon, Rhode Island, Utah, and Washington. (This list is correct as of 3/22/20; check the full list of Current Declared Disasters as news progresses.)
Once a declaration is made for designated areas within a state, the eligibility information on the application process for Economic Injury Disaster Loan assistance will be updated.
Basic loan terms:
All eligible business owners could receive targeted low-interest loans up to $2 million in assistance. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.
These loans also offer long-term repayments in order to keep payments affordable, up to a maximum of 30 years. The terms will be determined on a case-by-case basis and based on each borrower’s ability to repay.
The interest rate is 3.75%
You will not be eligible if you:
Have credit available elsewhere
Have bad credit or defaulted on a prior SBA loan.
How to apply for an SBA Disaster Loan as a Maker:
You can submit an application online, directly to the SBA. Once you submit your application, it can take 18-21 days to approve, and another 4 business days to receive the funding. Although with an influx of applications on such a massive scale, you might experience longer delays.
Application Steps:
Register for an account for your business and start the 3-step application process here.
Check Eligible Disaster Areas to make sure your state is covered, and then select Apply Online Loan Type Selection: choose Business and Non-Profits Fill out Business Losses: choose your type of business, and then select Economic Injury (EIDL) as it specifically pertains to COVID-19
Declaration Selection: choose your state and county of your business operations, and choose the COVID-19 disaster (there could be multiple disasters listed from prior events). You will see a filing deadline listed for your location, based on the date of your state’s declaration.
Filling out and submitting the application online will be your quickest option, but you can familiarize yourself with all of the information and Tax Information Authorization on SBA Form 5 that you’ll need to provide in order to proceed.
What can you do if you need funds now and cannot wait?
You can contact any SBA partnering non-profit lender and request an SBA microloan of up to $50,000. Similarly, commercial lending partners may offer SBA express loans up to $350,000 and/or SBA 7a loans up to $5 million. The 7a loans are typically processed within 30 days, while microloans and express loans are processed even more quickly.
Of course, there are other loans and grant programs that are available, depending on the exact type of business you have and where you live. Feel free to comment below if you have other resources we should share in future articles.