Forced business closures and lost revenue as a result of COVID-19 are causing many businesses to face a severe cash crunch. One currently available avenue for relief is the Small Business Administration (“SBA”). The SBA is currently offering Economic Injury Disaster Loans of up to $2.0 million for eligible small businesses and not for profit organizations. Eligibility as a qualified small business varies by industry and is generally subject to average annual receipts or number of employee thresholds. Loans can be up to $2 million and may be used to cover payroll, fixed debts, accounts payable and other bills. Interest rates for small businesses are 3.75% and 2.75% for non-profits. Payment terms can be up to 30 years but are determined on a case by case basis.
Applicants for SBA loans are required to provide the following:
The last three year’s financial statements and tax returns.
The owner’s personal financial statements for the last three years.
The tax returns of any entity in which an individual has or had an interest of greater than 20%.
Accounts receivable and accounts payable aging schedules as of the loan application date.
Form 4506-T, which allows the IRS to share your data with the SBA.
The SBA highly encourages applicants to apply online, but the SBA notes that their website is experiencing heavy traffic and recommends applicants visit on off-peak hours. The website to apply is DisasterLoan.SBA.gov. We highly recommend that that small business owners apply or gather the necessary information now if they think they will need SBA loan assistance as the approval process is being delayed. More information on whether your business will qualify for an SBA disaster loan can be found here.
In addition to the Economic Injury Disaster Loans mentioned above, there is proposed legislation in both the United States Senate and House of Representatives that would provide additional funding for small businesses to meet immediate financial obligations. Both proposals would also allow for portions of the loans to be converted to grants as long as the funds are used to keep employees on the company’s payroll. These proposed legislations have not been finalized and are subject to change. We will provide additional information as updates are available.
State and local government agencies are also providing additional relief options to small businesses. A few local examples are listed below. We encourage small business owners to check with their local and state commerce departments for additional information.
– Delaware Hospitality Emergency Loan Program (HELP) – Delaware is offering 10 year, no-interest loans for up to $10,000 per month for related companies in the hospitality industry. The HELP loans are available to companies with less than $1.5 million in annual revenues. More information can be found here.
– Philadelphia COVID-19 Small Business Relief Fund – The city of Philadelphia is distributing grants and zero-interest loans throughout the city to small businesses that have been impacted by the coronavirus. Businesses with less than $500,000 in annual revenue will be eligible for a $5,000 microenterprise grant. Businesses with annual revenue between $500,000 and $3 million will be eligible for small business grants up to $25,000. Businesses with annual revenue between $3 million and $5 million will be eligible for a small business zero-interest loan up to $100,000. More information can be found here.
As always, please contact your Siegfried Advisory Relationship coordinator with any questions.
– Your Siegfried Advisory Team