American business owners affected by the coronavirus outbreak can take a deep breath after receiving some warmly-welcomed news this week.
The U.S. government has authorized a $50 billion cash injection into the Small Business Administration, providing more low-interest loans to help small-and-medium-sized businesses in impacted areas overcome these difficult times.
Additionally, President Trump said that select individuals and businesses will have the ability to delay filing federal income taxes for up to 90 days with no penalties.
Why is this important news for your small business? Find out below.
How has coronavirus impacted small businesses?
Small businesses across the country, and indeed across the globe, are feeling the hurt during this coronavirus outbreak. It’s no secret that throughout many industries, business success and stability are at risk as a consequence of the coronavirus – even those that spent the time to create a business disaster recovery plan.
The current impact of coronavirus on small businesses:
- Hotels are seeing extreme dips in occupancy rates
- Restaurants are shutting their doors in droves
- Movie theaters are dropping in their market value
- Airlines are experiencing sharp declines in bookings
- Professional sports are delaying their season openings
- Conventions are postponing or canceling entirely
It’s not all bad news for businesses. Several industries, namely pharmaceuticals, cleaning products, and home entertainment are positioned to benefit in the wake of coronavirus.
Some of these effects are the result of government-enforced shutdowns, some because of smart business tactics, and some as a direct result of public panic. We want to remind our audience how important it is to remain calm and informed while these changes are happening. The fact is, we’re all in this together (even though we may be keeping our physical distance!).
While we’re all left waiting to see how coronavirus will affect small businesses in the US over the long run, that doesn’t mean that there’s nothing that can be done. Quite the contrary! It’s essential to get your business prepared to handle the stresses that come along with coronavirus – that includes learning more about coronavirus SBA loans.
Coronavirus SBA loans
Let us clarify – there are no specific ‘coronavirus business loans’. The term ‘coronavirus SBA loans’ is just the casual name for the Small Business Administration’s Economic Injury Disaster Loans program, and may be used with reference to the SBA’s efforts to combat the effects of COVID-19 on American businesses.
SBA Economic Injury Disaster Loans are designed to “provide the necessary working capital to help small businesses survive until normal operations resume after a disaster.” EIDL’s can provide small businesses with up to $2 million in funds. That financial aid should be used to help the business cover their operating expenses and other financial obligations. And since they’re designed for businesses that are in need, EIDL’s have interest rates that max out at 4 percent yearly (3.75% for coronavirus specifically) over a maximum term of 30 years.
Curious if your business qualifies for coronavirus SBA loans?
Who qualifies for coronavirus SBA loans?
First and foremost, to qualify for coronavirus SBA loans, your business must be located in a designated disaster area which has been identified as having been impacted by the coronavirus. At this time several states have applied for eligibility through the SBA, but there have yet to be any announcements of approved applications. Reports say that, in order to qualify, the state must provide at least 5 cases per county of businesses facing financial losses.
Secondly, your business must show that it has exhausted other routes toward obtaining additional funding (i.e. banks, private lenders, etc.). This qualification makes sense since EIDL’s exist to help small businesses that are in great need of financial assistance. If your business can potentially get funding from a traditional or alternative lender, it’s best to leave the EIDL’s for the less fortunate.
Third, your business must have no more than 500 employees. Pretty straightforward.
So with these qualifying criteria in mind, how can you apply for coronavirus business loans through the SBA?
How to apply for the SBA coronavirus relief loan
Applying for coronavirus business loans is fairly easy to do, especially now that you have the option to apply for SBA disaster loans online through Become. In response to recent changes to the federal interest rate, our partner SmartBiz has introduced discounted SBA loan interest rates between 5.75% to 8.0% for loan amounts between $30,000 and $5 million. That could mean savings for small business borrowers of up to $11,000 or even more!
Our partner Fountainhead, a nationwide leading SBA loan provider, is one of only 14 non-bank lenders that has been licensed to issue SBA 7(a) loans. This means that they will also be providing COVID-19 SBA 7(a) recovery loans to small businesses.
Easy as it may be, there will be paperwork that you’ll need to provide when applying – so be sure to get organized beforehand.
Documents needed to apply for coronavirus SBA loans:
- Signed & dated IRS Form 4506-T (gives the IRS permission to share your tax return info with the SBA)
- Completed & signed SBA Form 5, SBA Form 413, SBA Form 2202, and (maybe) SBA Form 1368
- Applicant contact info
- Applicant SSN
- FEMA registration number (apply for one here)
- Deed or lease info
- Insurance info
- Financial info (including current year-to-date profit and loss statement)
- Federal Tax ID number
Once you’ve gotten approved and have received the coronavirus business loan you were aiming for, it’ll be time to think about how to make repayments. There are several methods of making repayments on coronavirus SBA loans, including online with recurring payments (find out more here).
If for some reason your business doesn’t qualify for coronavirus business loans backed by the SBA, don’t be worried. There are alternative options available for you to pursue.
Additional coronavirus relief options for small businesses
Not sure if you’ll be eligible for coronavirus SBA loans? Fortunately, they aren’t your only hope for financial relief during this tumultuous time. If coronavirus business loans backed by the SBA aren’t in the cards for your business, consider the following alternative options available in the Become online business lending marketplace.
Alternative coronavirus relief options for small businesses:
1. Unsecured business emergency loans
Small businesses often lack the valuable assets that larger businesses may use to secure loans. That makes unsecured business loans a valuable alternative, especially for businesses that are hurt by the coronavirus. Do note that during emergencies, unsecured loans may require a personal guarantee from the business owner since the business may still pose a higher risk given the situation.
2. Business lines of credit
In times like these when unexpected business expenses can appear out of the blue, having a flexible form of financing to turn to is an invaluable tool. Business lines of credit are exactly that. They offer business owners the ability to use funds for basically anything business-related, and the funds can be used on an as-needed basis. That means you’ll only end up paying interest on the funds you actually use, not on the entire line of credit. Quite the handy safety-net to have in place!
3. Equipment financing
Emergency situations can place a heavy burden on your business and may even mean having to send employees home. In light of that concern, one way to keep your business running is to use machinery that can get the job done in the absence of helping human hands. While this option might not be entirely feasible to businesses in every industry, it’s an idea worth entertaining if it can mean the difference between failure and survival for your business. Plus, much of the time, business equipment loans are tax-deductible and the equipment serves as its own collateral on the loan!
Take a deep breath
Small business owners have it hard right now, but they’re not alone in this struggle. The government is offering its support, and so is the entire team here at Become. We want to emphasize the importance of remaining composed while things may seem to be going a bit off the rails out there. And we also want to leave you with a gentle reminder that our services remain unaffected and available at your fingertips. Stay healthy!