Understanding the SBA and Financial Harm Credit score for COVID-19
After temporarily restricting new applications to US farms only, the Small Business Administration (SBA) now accepts new applications for counterfeit economic loan (EIDL) loans from all eligible small businesses.
The SBA will also process EIDL applications submitted prior to April 15, when the portal closes. “For businesses that applied for an EIDL through the simplified application portal prior to the law change, the SBA will process these applications without having to reapply,” the SBA writes on its website.
This disaster loan program has been expanded to include businesses and nonprofits, including nonprofits like private churches and universities that were affected by COVID-19 earlier this year. Organizations can determine if they have suffered property damage and use these funds to pay for working capital and operating costs when recovering from the effects of a pandemic.
The SBA has also offered eligible employers EIDL advances of up to $ 10,000 ($ 1,000 per employee), which are non-refundable and can be granted even if the business is not approved for a loan. However, the SBA announced in mid-July that it had made no progress with the new applicants and that Congress received $ 20 billion. “The law does not allow the SBA to make new loans under the EIDL after all funds have been allocated to the program,” the SBA said in a news release.
Under emergency COVID-19 legislation, the SBA has donated nearly $ 20 million to nearly $ 6 million from small businesses with 30.5 million employees under Jovita Carranza’s unprecedented EIDL Advance SBA program. Developed from the ground up in less than two weeks, the program has helped millions of small businesses, including nonprofits, sole proprietors, and independent contractors across all industries and businesses.
The SBA said that “EIDL applications are pending, although prepayment is no longer possible.”
Read on for an overview of the EIDL program, how to qualify and apply, and what you need to know if proceeds from your Payment Protection Program (PPP) are used to refinance your EIDL.
Eligibility to participate
– Your business needs the economic losses associated with COVID-19. The business receiving the loan must be classified as a small business based on the North American Industry Classification System (NAICS) code, annual sales, and average number of employees during the billing period. Learn more about the SBA sizing standards.
– Under the updated proposal, the following types of eligible applicants are:
- Corporations, farms, cooperatives, employee co-ownership plans (ESOP) and tribal businesses for small businesses with up to 500 employees
- A sole proprietorship (with or without employees) and external employees
- Small farms and agricultural cooperatives employing more than 500 people, but otherwise meeting SBA size standards
- Most private non-profit organizations, regardless of size
– According to the SBA Membership Guide and Sizing Guidelines, when calculating the size of your company, you must take into account the annual income and income of domestic and foreign workers who have an income or less. Applicable rules for joining the guide include:
- A relationship exists when a company controls another company or has the authority to control or control another company (or parts of both).
- Control can be established through ownership, management, or other relationships or interactions between the parties.
- They are considered positive and negative controls. Negative control includes situations where, under the bylaws, bylaws, or with your consent, a minority shareholder may impede a quorum or block the meeting or shareholders.
– Current SBA loans do not prevent you from applying for a loan in the event of a disaster. However, according to the SBA, companies must have a good reputation . Applicants may not be eligible if they have not met the above SBA loan conditions.
– The SBA must determine if applicants can be trusted.
– For loans issued before September 30, 2020, the SBA also deviates from the normal EIDL requirements that recipient businesses must meet one year prior to the disaster declaration (provided operations are completed by September 31, 2020). 2020). January 2020) under the name “A loan elsewhere.”
– Use: the funds provided must be used for specific purposes. Acceptable uses include working capital, outstanding debt payments, pay stubs, liabilities, and other bill payments that could have been paid had the disaster not occurred. It is unacceptable to use a loan to replace a lost sale, increase profits, refinance long-term debt, or the possibility of financial expansion. EIDL funds cannot be used to cover expenses already covered by a PPP loan. (Read on to learn more about EIDL and PPP.)
– Loan Restrictions: The legal limit for SBA loans is $ 2 million. However, as many news and publishing sites reported in May 2020, due to the high volume of applications, the SBA set a new limit of $ 150,000. The amount of each loan is also limited to economic loss as determined by the SBA less business interruption insurance and other principal payments up to the administrative credit limit. The SBA also takes into account contributions from the business and / or its owners or affiliates.
– for small businesses is profit, 3.75% and 2.75% is private.
– Maximum duration : the maximum duration is 30 years. However, the conditions will be determined on a case-by-case basis, based on the repayment capacity of each borrower.
– Collateral : The SBA requires that all loans over $ 25,000 be collateralized. Property is acceptable as collateral. The SBA said it would not decline the loan due to lack of collateral, but that the borrower would have to provide the available collateral.
- CARES has eliminated the Personal Guarantee Policy for advances and loans of $ 200,000 or less.
– Economic damage: If you are looking for a report on the catastrophe caused by the coronavirus, select “Loss due to shame” only when considering the losses of a company.
– Online: The fastest way to apply is https://www.bridgepayday.gov/page/disaster-loan-applications
– Mail: printed applications can be found here .
As stated in the application, the SBA must submit the following documents:
– Application form (SBA Form 5), completed and signed.
The Tax Information Verification (IRS Form 4506T) is completed and completed by each applicant, each client who owns 20% or more of the applicant’s business, each general partner or director and owner who owns more than 50% of a signed affiliate .
– Complete copies of the applicant’s recent tax returns, including forms; an explanation if not available
– A personal financial report (SBA Form 413) to be completed, signed and dated by the applicant for each client who owns 20% or more of the applicant’s assets and any general partner or director.
– List of liabilities that lists all permanent debts (form SBA 2202 can be used).
Additional financial information may be required upon request, including:
– A complete copy of the most recent federal tax return with all plans for each client who owns 20% or more, each general partner or board member, and each affiliate if the owner owns more than 50% of the affiliate.
– If a current federal tax return has not been filed, the year-end income statement and the balance sheet for that year
– In general, if an increase in economic damage is reported, additional reporting requirements (SBA Form 1368) with monthly sales figures are required.
EIDL LOAN REFINANCING THROUGH THE PPP LOAN PROCESS AND LOAN TRANSFER TO SBA
According to the SBA memo issued June 19:
– An EIDL loan cannot be refinanced with a PPP loan if the PPP borrower received the EIDL loan before January 31, 2020 or after April 3, 2020.
– EIDL PPP loans can not be refinanced or if the borrower of the PPP EIDL Fund on January 31 and April 3, 2020 and the resources of the PPP loan are used for purposes other than remuneration, they are out of date.
– If you have a borrower PPP – EIDL funds are added on January 31, 2020 and are used for labor costs – then you have PPP – their loans were used to refinance the full amount of the loan EIDL.
The notice specified that the amount of the EIDL loan to be refinanced does not include the amount of the advance received by the EIDL PPP borrower , since these advances do not require repayment.
In the case of PPP loans, where the loan collateral amount is sufficient to refinance catastrophic losses, the PPP lender must pay “the loan amount to refinance the EIDL loan after deduction and direct transfer. “ to the SBA , not the SBA . BORROWER’S APPLICATION. .
“If the PPP lender has already paid the loan funds directly to the borrower to refinance the EIDL loan, the PPP lender is responsible for informing the borrower of the PPP loan amount provided by the borrower. SBA. “.
Instructions are provided on how to electronically submit EIDL refinance payments to the SBA. Note that the EIDL loan number, not the PPP loan number, must be entered in the SBA loan number field of the appropriate form.