What is the SBA Disaster Loans program?
The Small Business Administration (SBA) disaster loan program (also known as Economic Injury Disaster Loans, EIDLs) is designed to provide loans to businesses affected by disaster areas as declared by the SBA or the President of the United States. The loans are at favorable terms and are meant to assist businesses whose income has declined because of the disaster. Here are some common questions related to the SBA Disaster Loan program.
What are the loan terms?
The loan terms are for a maximum of 30 years, but the SBA will determine your loan term based on your financial condition and your ability to repay. There is no prepayment penalty.
How much can I borrow?
The maximum loan amount is $2 million, but the SBA reserves the right to increase that for what they believe are critical businesses. This does not mean that every business will be able to borrow $2 million. The SBA will review your tax returns and your request and make a determination of how much they will lend based on your needs and ability to repay.
What are the interest rates?
The interest rate is fixed at 3.75% for the term of the loan. If you are a non-profit, the interest rate is 2.75%
What can I use the money for?
You can use the money to pay rent, payroll, debts, accounts payable, or any bills that cannot be paid because of the disaster. You cannot use the money to refinance existing debt, such as other high interest rate loans.
Do I need collateral?
You do not need collateral to qualify for the loan, but if you do have collateral, the SBA will take an interest in that collateral. If you have multiple properties, the SBA will take as much collateral needed to be fully secured in their loan.
What else do I need to know?
You must submit a completed form 4506-T for the SBA to obtain a copy of your tax return. The SBA will use this to determine your loan need as well as your ability to repay. Also, passive businesses, such as rental properties, will not be eligible. If you have more than one business that you’re an active participant, the maximum you can obtain is $2 million combined. Lastly, the SBA website may be inundated during work hours so it may be helpful to apply off peak hours.
How long does it take to get the money?
SBA estimates it takes about 3 weeks from time of applying to get the loan, but you should anticipate double that time because of the high volume of requests.
Is there a deadline?
No deadline at the moment, but as things progress, there will be a deadline.
How do I apply?
You can apply directly through the SBA by visiting www.sba.gov
Looking for an independent fiduciary financial advisor who can advise you on investments, retirement, real estate, alternative assets, and taxes? Contact ACap Advisors & Accountants to schedule a free initial consultation. Our clients include individuals, small businesses, entrepreneurs, and anyone serious about saving and investing for their future.
Ara Oghoorian, CFA, CFP, CPA is the founder and president of ACap Advisors & Accountants in Los Angeles, CA.