March 23, 2020
Turn to them for everything from COVID-19 relief to expansion funds.
Whether you’re seeking financial help for your small business in response to the recent Coronavirus (COVID-19) outbreak or simply wondering how to obtain financing to expand, a loan from the Small Business Administration (SBA) may be just the solution you need.
SBA low-interest long-term loans are a viable option for business owners suffering substantial disaster-related physical or economic damage or who want to grow their business and can’t obtain other non-government financing.
SBA Disaster Assistance Loans
SBA Disaster assistance loans are designed to help businesses and homeowners recover from declared disasters such as hurricanes, floods, and wildfires. SBA disaster assistance consists of low-interest loans to businesses, renters, and homeowners in affected areas. Loans can be used to cover costs once insurance and funding from the Federal Emergency Management Agency (FEMA) runs out.
SBA provides both Business Physical Disaster Loans (BPDLs) and Economic Injury Disaster Loans (EIDLs) to repair physical damage and provide working capital respectively. The total loan limit is $2 million with maximum terms of 30 years. Interest rates and specific terms depend on whether you have access to credit elsewhere for a Business Physical Disaster Loan. Your business is not eligible for an EIDL if you have access to non-government funds.
SBA Coronavirus (COVID-19) Assistance Loan
The process to apply for COVID-19 aid is new and a little more complicated. The recently enacted Coronavirus Preparedness and Response Supplemental Appropriations Act provides that once the governor of your state or territory sends a request to the Small Business Administration, the SBA will issue an Economic Injury Disaster Loan (EIDL) declaration.
COVID-19 loans can be as much as $2 million and can be used to help you and your business overcome temporary loss of revenue and other adverse effects of COVID-19. Specifically, COVID-19 relief loans can be used to pay fixed debts, payroll, accounts payable and other bills you can't pay due to the economic impact of COVID-19 on your business. Loans offer repayment terms up to 30 years at an interest rate of 3.75% with specific terms based on your situation. If you have other credit available, you won't be eligible for this relief. Non-profits pay an interest rate of 2.75%.
Where to Apply for SBA Disaster Assistance Loans
To apply for a regular disaster assistance loan, go to the SBA Disaster Assistance web page. Once a Coronavirus (COVID-19) EIDL declaration has been made for your area, the SBA Disaster Assistance web page will be updated and you can apply for your loan there.
SBA Business Expansion Loans
The disaster-related loans referenced above are made with funds appropriated by Congress. When you apply for an expansion loan from the SBA, you are actually applying for a commercial loan, structured according to SBA requirements with an SBA guaranty. Small business owners and borrowers who have access to other financing with reasonable terms are not eligible for SBA-guaranteed loans. Guaranteed loan programs from the SBA include the following:
7(a) Loan Program
This is the SBA’s most common loan program and provides financial help for businesses with special requirements, such as franchises, farms and agricultural businesses, and fishing vessels. There is no minimum loan amount but the maximum is $5 million.
There are nine types of 7(a) loans, each with its own maximum loan amount, SBA guarantee, negotiated interest rate and other factors all of which are spelled out on the 7(a) loan program web page.
This program provides small, short-term loans up to $50,000 to small businesses and certain types of not-for-profit childcare centers. Loans can be used to buy new equipment, supplies, furniture, or to provide working capital. Loans are provided by micro-lenders, with each having its own lending and credit requirements.6
This loan program provides financing for businesses to purchase real estate, major fixed assets and equipment, or make improvements like landscaping. This program can also provide funding for renovation.7
Where To Apply for an Expansion Loan
As previously noted, the SBA doesn't loan money directly to help you grow your business like it does when providing disaster relief. Instead it sets stipulations for loans made by its partners (lenders, community development organizations and micro-lending institutions). You can apply for an expansion loan at any SBA approved lender or use the SBA's Lender Match.