Breaking news: SBA COVID loan increase updates
The SBA COVID Loans are here to help small businesses get back on their feet after the pandemic. What’s more, the recent update means it now provides more funds. Learn more about how this relief program can help you.
Let’s start by talking about the SBA COVID Loan terms and application process. Unfortunately, you may encounter delays while getting this loan. That’s why we will give tips on what to do if it happens and the other relief programs that can help you.
Various countries are now providing ways for their people to recover from the coronavirus pandemic. This includes the United States and its ongoing SBA COVID Loans. If you’re a small business owner, see how you can apply for this financial assistance today!
What are SBA COVID loans?
For more help with COVID-19 Economic Injury Disaster Loans:
📄 Read the FAQ: https://t.co/R82g6U0RlI
☎️ Contact customer service at 800-659-2955 or [email protected]
🗺️ Reach out to your district office: https://t.co/oG9al18RwZ
🔗More: https://t.co/6oK1l71tFe pic.twitter.com/wXJDyZQmGg— SBA (@SBAgov) August 6, 2021
As the name suggests, these loans come from the Small Business Administration (SBA). The goal of the SBA COVID loan is summed up in the following statement:
“To meet financial obligations and operating expenses that could have been met had the disaster not occurred.”
If you own a mom-and-pop store, you probably were expecting profits last year. Unfortunately, the pandemic may have dashed that hope. It stopped many small businesses from operating.
You might be able to recover those projected earnings with the help of this business loan. That’s why it’s called the COVID-19 Economic Injury Disaster Loan (EIDL).
Here are the small businesses that qualify for COVID EIDL loans. Note that you should still check the eCFR to confirm this. Make sure your company specifically fits the SBA standards.
- Your business should only have 500 employees or fewer.
- Independent contractors and sole proprietorships may also qualify
- Cooperatives and their affiliates
- Employee Stock Ownership Plans (ESOPs) and their affiliates
- Agricultural enterprises
- Tribal small business concerns
Also, you have to check how your company’s size affects its eligibility. Check the Paycheck Protection Program site for more information.
How does this SBA COVID loan work?
Let’s say you qualify for this SBA loan. Now you should check the loan terms. See if the COVID EIDL loan fits your business needs:
- Underwriting – You will have to prove your ability to repay using your credit score. The SBA COVID loan requires at least 570 or more.
- Interest rates – Businesses get a 3.75% fixed interest rate for 30 years. Private nonprofit organizations get 2.75% set for 30 years. For payment deferrals, the loan lasts for 30 years, and you can make prepayments at any time with no penalty. You delay payments for the first 18 months then pay back over the remaining years.
- Collateral – For a loan amount of $25,000 or less, you don’t need collateral. If it’s $200,001 – $500,000, you need a security agreement (UCC-1). This won’t require a lien on real estate unless it’s an accommodation to an applicant.
- Personal guarantee – You won’t need a guarantee if your loan is $25,000 or less. For $200,001 – $500,000, you will need one. Specifically, individuals or entities that own 20% or more of your business should get a personal guarantee. If no owner holds 20% or more, at least one entity or individual must give a full guarantee.
- It’s not a grant – You have to repay this SBA COVID loan. Unlike the PPP loans, you can’t get the SBA COVID loan forgiven.
You could allocate the loan proceeds for your operating expenses. Also, you could use it to pay business debts such as credit card debts. You may not use it to expand your business.
How do I apply for the COVID EIDL loans?
You can start your application by going to the COVID-19 EIDL website. Or you could just type “SBA COVID EIDL” in your internet browser. What’s more, you need the following documents:
If your company was “in operation” before January 1, 2020:
- 2019 Federal Income Taxes (required)
- 2020 Federal Income Taxes (if available)
- IRS Form 4506-T (You will fill out this form once you apply.)
If your company was “in operation” on or between January 1, 2020, and January 31, 2020, you only need the 2020 Federal Income Taxes. If it’s not available, you need to submit other forms.
You may need some financial statements from your business. You may prepare them externally or internally prepared. These include profit and loss statements and balance sheets.
The term “in operation” refers to establishments in their organizing stage but were not able to open for business. You need to show proofs, such as:
- Business licenses
- Classified ads for hiring staff
- Agreements with contracts
- Purchase orders for equipment
What if my SBA COVID loan application failed?
📝 Eligible small businesses, nonprofits, sole proprietors and independent contractors can still apply for a #COVID19 Economic Injury Disaster Loan.
▶️ Learn more about EIDL, the Targeted EIDL Advance, and Supplemental Targeted Advance: https://t.co/6oK1l71tFe
— SBA (@SBAgov) June 2, 2021
Let’s say you’re done applying for this small business loan. Unfortunately, your application got rejected. In case this happens, here are some of the usual reasons why:
- Poor credit history – Your credit score wasn’t high enough. You could ask for reconsideration so you can reapply. Then, you’ll have to show you can repay the loan. You’ll do this by submitting more financial info.
- Info errors – You might have placed info that caused the SBA to question its validity. You have to respond within seven days, or the SBA will decline your application.
- Loan limit – A borrower and its affiliates may only borrow up to $2 million. Perhaps you went beyond that amount. If not, request reconsideration to reactivate your application. Then you’ll have to give more info.
- Small businesses only – Your company might not have fit the SBA standards. If you disagree, you may also request reconsideration. Moreover, you will have to complete SBA Form 355.
Those who got their COVID EIDL loan before April 7, 2021, they’re likely eligible for a loan increase. This is based on the new maximum loan amounts announced on March 24, 2021.
They may request an additional amount. What’s more, the SBA is sending these people emails to inform them how to get this loan increase.
Are there other COVID aid options for businesses?
Perhaps you need more than just the EIDL loan to meet your needs. In that case, you may check the cross-program eligibility for other types of SBA COVID loan programs.
See if you qualify for other relief options from your local government. For example, people from South Dakota may apply for an SBA Express loan. It might have what you need.
You could also try alternatives from financial institutions. Banks also have business loan options. Here are their usual requirements:
- Credit score – Before they give you approval, lenders often check your credit rating. It’s the same with a private business loan. You need at least 650 to 699. Although, you’ll get better rates and other terms if your score is 700 or more.
- Cash flow & income – If your business was earning a decent amount before, you have a good chance of getting approved.
- Current debt balances – Lenders are more likely to approve your loan application if you only have a few existing loans.
- Age of business – You have a better chance of getting the loan if your company has been running for several years.
Your options might have different requirements. Please ask your bank for further details. You may want to check more than just one bank. This will help you find better choices.
Final thoughts
No matter your SBA COVID loan, pay the monthly payments on time. This will help you keep a good credit score. It even helps you land a job! In turn, you keep access to loan options.
If you’re not a business owner, you have other COVID relief options. For example, you may apply for Child Tax Credits if you have a family. See if you’ve claimed your 3rd stimulus check.
Reducing your debts can also help you cope with the pandemic. You may try debt consolidation, settlement, or counseling. You have DIY options too.
Learn more about the SBA COVID loans
What is the SBA COVID loan?
Small businesses closed down for several months due to the COVID lockdowns. The SBA COVID loans are intended to help these companies reopen.
How do I apply for SBA COVID loans?
Visit the COVID-19 EIDL website for more information. Find out the forms you need. See the other requirements for your type of business.
Did the SBA COVID EIDL loan increase?
If you got your COVID EIDL loan before April 7, 2021, you probably qualify for an increase. The SBA may have sent you an email regarding this loan increase.
