The COVID-19 virus is having an immense economic impact on businesses and individuals. Our team at MRPR has been tracking local, state and federal policy regarding emergency funding. Things are changing quickly and we understand this information can be both confusing and overwhelming for business owners to navigate on their own.

In recent weeks, we have been asked most often about the Economic Injury Disaster Loans (EIDL) provided by the U.S. Small Business Administration (SBA). These loans provide funds to small businesses for working capital needs or normal operating expenses in amounts ranging up to $2 million, through the businesses’ recovery period.

How Does a Business Qualify for SBA Loans?

The SBA targets small businesses and non-profits that have been severely impacted by COVID-19 and issues loans based on actual economic injury. They will review a company’s current available financial resources and prior financial health to determine eligibility and the ability to repay the loan.

How Can SBA Loans be Used?

The funds can be used to cover:

• Payroll
• Accounts Payable
• Fixed debt (anything with a fixed payment schedule)
• and other bills that can’t be paid due to the impact of COVID-19 

The SBA is generally trying to understand a businesses’ monthly expenses over the next six month period in order to give a business the runway needed to complete restoration of former operations.

Interest Rate & Repayment Terms of SBA Loans

Interests rates will be lower than 4% and the terms for repayment can be up to 30 years. Other favorable terms can be decided, including the possibility of no payments on the loan for up to 12 months. Terms are decided case-by-case and there are no prepayment penalties.

SBA Disaster Relief Loan Application Requirements

Just this week, the SBA streamlined the process for application, here's a step by step description: 

Step 1

It requires a business to fill out two forms:

1. either the Form 5 or Form 5C (depending on entity type)
2. Form P-019

Access the forms and download here under the “Download Business Forms” section.

Step 2

After filling these out, you can drag and drop completed forms into the field at the bottom of this same website under the heading “Upload Business Forms.”

Step 3

This will get the ball rolling. You should expect an agent from the SBA to be in contact with you in the coming weeks.

In order to be prepared for the next phase of the application process, we would suggest you have copies of:

• 2019 financials
• year-to-date 2020 financials
• and your most recent 2 years of business and personal tax returns gathered.

Step 4

You will likely be asked to fill out various forms listed under “Additional Forms,” on the SBA website. Looking through these PDF’s will familiarize you with the process, and allow you to be prepared to help shorten the time it takes to get the loan processed and funded.

Additional FACTS on EIDL Loans:

• SBA is encouraging people to ask their banks for increases in current lines of credit or other forbearance measures for immediate relief. This credit availability along with business interruption insurance and collateral will be taken into consideration in determining economic injury and need. Loans over $25,000 will likely require collateral, though the loan will not be declined based on the lack of collateral. The SBA will accept a 2^nd position on a mortgage.
• Clients can begin the loan process and pause the offer for up to 6 months it if they do not end up needing the funds or receive aid in other forms. The Federal government is working on additional aid packages and some grants or other forms of aid in the CARES Act could exclude the simultaneous use of SBA loan and grant options.
• The SBA is currently estimating 60 days for application and funding, and this could be longer due to increases in volume of the applications. 
• We suggest that you make contact with the Michigan Small Business Development Center as a free resource for this process and other grants and forms of assistance that are being released and updated daily.

Helpful Resources:

• Michigan Small Business Development Center and click “Request Business Consulting.” Michigan Small Business Development Center is sponsored by MEDC and SBA.
• You can also visit The Michigan Economic Development Corporation and navigate to COVID-19.
• Small Business Guidance & Loan Resources 

As mentioned above, other aid packages are being activated by the Federal government including the  "Paychecks Payment Protection Act" provision of the C.A.R.E.S. Act just signed by the President. We will provide updates as more information becomes available.