Congress Passes and President Signs CARES Act, Expanding SBA Disaster Loan Program and Loosening Program Requirements, As Well As Other Relief Programs
As the COVID-19 outbreak wreaks havoc across many sectors of the economy, small businesses in particular are shouldering a heavy burden. While other relief packages may be forthcoming, the Disaster Loan Assistance program administered by the Small Business Administration (SBA) offers direct government funds through an existing program to private for-profit businesses and nonprofit organizations of up to $2 million with low interest (3.75%), long-term payback provisions (up to 30 years). Here is a summary of the program basics (SBA Disaster Loans Available Summary.docx). Other relief programs in the CARES Act will be addressed in additional postings to this site, including the “Paycheck Protection Program.”
STREAMLINED SBA APPLICATION PROCESS FOR DISASTER LOANS
As of March 27, 2020, the SBA has materially streamlined its online application process at https://disasterloan.sba.gov/ela/ and requires a significantly reduced amount of information.
- There is no longer a pre-registration process requiring a user name and password.
- Once the site is on-screen, click “apply online.”
- Download the following three forms:
Business Loan Application (SBA Form 5).pdf
Home or Sole Proprietor Loan Application (SBA Form 5C).pdf
Economic Injury Disaster Loan Supporting Information (P-019).pdf
- You are no longer required to complete the forms on-line; instead print, fill them out offline, scan and upload them.
- Form 5 is for entities and Form 5-C is for sole proprietorships.
- Item 15 on Form 5 asks for the economic injury you are claiming.
- On the economic injury form, respond to the question on revenues and self-certify as to size of the applicant eligible for the Disaster Loan Program.
- Upload the completed Form 5 or 5C (whichever is applicable) and the Economic Injury form.
- The other forms listed below (in addition to the three above) should be downloaded and completed so if an SBA loan officer contacts you for this additional information (which the SBA has the right to ask for), you are prepared.
See below screenshot of new SBA Disaster Loan website.
Below are links to the other documents the SBA can later request:
Instructions for Request for Transcript of Tax Return (IRS Form 4506-T).pdf
Instructions for Schedule of Liabilities (SBA Form 2202).pdf
Personal Financial Statement (SBA Form 413D).pdf
Release of Inheritance and Donation (Modelo SC 2907) (Puerto Rico).pdf
Request for Transcript of Tax Return (IRS Form 4506-T).pdf
Schedule of Liabilities (SBA Form 2202).pdf
Additional Filing Requirements (SBA Form 1368).pdf
Additional Filing Requirements (SBA Form 413D) Spanish.pdf
Fee Disclosure Form and Compensation Agreement (SBA Form 159D).pdf
Hacienda Statement of Authorization (Puerto Rico).pdf
CARES ACT PASSES CONGRESS
The Senate, on March 25, 2020, passed the CARES Act, and the House, on March 27, approved the CARES Act, which the President signed today. We will update the information below and include similar information for the new “Paycheck Protection Program” for “small businesses” and other relief programs which are also included in the CARES Act.
The CARES Act revisions to the SBA Disaster Loan Program are as follows:
- businesses with 500 or fewer employees, regardless of industry classification
- individuals operating as a sole proprietorship or independent contractor with or without employees
- ESOP with 500 or fewer employees
- tribal business concerns with 500 or fewer employees
- this expanded eligibility criteria is in addition to the previously qualified parties of “small business concerns” under the existing rules.
- the rules related to personal guarantees on advances and loans of up to $200,000
- the rules requiring the applicant to have been in business for the 12 months prior to the disaster
- the requirement that an applicant must have not been able to obtain credit elsewhere.
- approve an application based solely on the credit score of the applicant and not require a tax return to be submitted
- use alternative appropriate methods to determine the applicant’s ability to repay the loan.
- provide an emergency “grant” of up to $10,000 within 3 days after submission by an applicant who is an “eligible entity” (under the new rules) or a “small business concern (under the old rules), based on a self-certification form (signed by applicant under the penalty of perjury); provided the $10,000 is used for: paid sick leave for employees unable to work due to COVID-19, maintaining payroll during the slowdown, meeting increased costs due to interrupted supply chain, paying rent or mortgage payments, or repaying obligations that cannot be met due to revenue loss
- this $10,000 grant does not have to be repaid even if the loan application is subsequently denied
- if an applicant also gets a Section 7(a) SBA loan, the advance amount shall reduce what applicant gets under the Section 7(a) loan (normal SBA loan and through a bank).
Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail.