MN Small Businesses can apply for SBA Economic Injury Disaster Loan (EIDL) Program

March 23, 2020

The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19).

Small businesses can apply directly to the SBA at https://disasterloan.sba.gov

Program Guidelines

Loan Purpose: Pay fixed debts, payroll, accounts payable, rent, mortgage payments, and other bills that can’t be paid because of the disaster’s impact.

Loan Amount: Up to $2,000,000

Interest Rate: 3.75% for Small Businesses, 2.75% for Non-Profit Businesses

Loan Term: Up to a maximum term of 30 years. The term to be decided by agency based on borrower’s ability to repay.

Payment: The monthly payment to be decided based on borrower’s ability to repay, the initial loan payment will be deferred for 11 months.

Pre-Payment: No pre-payment penalties. Borrower can start making payments before the first payment is actually due.

Loan Fees: There is no fee for the application or for the loan.  Fee’s limited to any required expenses related to perfecting collateral.

Personal Guaranty: Will be required of any owner with 20% or more ownership

Collateral: For loans < $25,000, no collateral is required. For loans over $25,000 and up to $2,000,000, collateral is required. Typical collateral could be a secured pledge on all business assets and/or equity in personal/business real estate from guarantors.

 

Application

Loan applications will be evaluated by U.S. Small Business Administration loan officers, apply directly at https://disasterloan.sba.gov.

Criteria: Credit history acceptable to the SBA and repayment ability

Eligibility: Business must be headquartered in a declared state and suffered working capital losses due to the declared disaster (not a general downturn in business due to the economy or other reasons).

 

Required Forms

  • SBA Form 5 (legal entity applicant) or 5C (sole proprietor applicant)
  • SBA Form 4506T for applicant, guarantors, and affiliates
  • SBA Form 2202 (schedule of liabilities)
  • SBA Form 1368 (monthly sales history)
  • SBA Form 413 (personal financial statement) for all 20% or more owners
  • Current financial information, including most recent Business Tax Return, most recent fiscal year end financials, current financial statements (within 90 days), and most recent Personal Tax Return of all 20% or more owners.

Forms and additional information available at: https://disasterloan.sba.gov/ela/Information/PaperForms

 

Timing and Other Considerations

The SBA is currently estimating that once they receive the full application, turnaround time for approval will be 21 days (this could increase with significant application volume).

Once loan approval has been granted, the SBA’s legal department will prepare loan documents and send them to the borrower.  The borrower will sign/date and mail them back to the SBA, once they have been processed the SBA will wire loan proceeds directly into the borrowing entity’s checking account.

Application and funding for SBA EIDL loans will not go through the bank (as 504 and/or 7a loans do).  The application and funding will be done directly with the SBA.

SBA is not a collateral based lender, but is a cash flow lender.  The SBA is looking for a clearly defined source of repayment versus having a loan that is fully secured.  The SBA will not decline a loan application solely based on a shortfall of collateral.

 

Resources

 

Questions:

Non-Highland Customers can contact the SBA customer service center at 1-800-659-2955, or [email protected]

Highland Bank has a dedicated team standing ready to support our clients and answer your questions relating to the COVID-19 SBA Loan Relief Programs. Existing Highland Bank customers can email your question (s) to [email protected] or contact our Customer Service Team at 952-858-4888 during regular business hours. However, given the high volume of inquiries, please know that we are responding as quickly as possible. Thank you in advance for your patience!