SBA's Economic Injury Disaster Loans
What REALTORS® Need To Know
In order to combat the hardships brought upon small businesses by the current COVID-19 pandemic, the U.S. Small Business Administration is providing financial relief in the form of an Economic Injury Disaster Loan (EIDL).
While the SBA normally provides disaster loans with lower interest rates to businesses and homeowners struggling to recover from declared disasters, their COVID-19 disaster loan has been streamlined for faster and easier access to the available funds.
What is it?
The SBA is offering disaster loans to small business owners in defined states and territories financially impacted by the current Coronavirus pandemic. These are designed to offset the substantial losses that may be incurred by decreased consumer traffic and/or health-related employee concerns as a result of COVID-19.
There are two main emergency programs available today through SBA that provide financial relief:
- The original Economic Injury Disaster Loan (EIDL): it can provide up to $2 million and the first payment is deferred for 12 months
- The new EIDL Emergency Advance: it can provide up to $10,000 and is and is specific to small businesses under the main EIDL program
Am I eligible?
As a REALTOR®, team, brokerage, or franchise, one of the first questions you’ll have is ‘Does this apply to me?’
The SBA confirmed that all small business owners in every U.S. state and also in all recognized territories are currently eligible to receive their low-interest loan due to the COVID-19 disaster.
There are, of course, specifications as to what makes up a Small Business and requirements for the Applicant to be approved, and these are detailed further on the SBA’s application form.
Some of those eligibility specifications from the SBA form are listed below:
- Applicant is a business with not more than 500 employees
- Applicant is an individual who operates under a sole proprietorship, with or without employees, or as an independent contractor
- Applicant is a cooperative with not more than 500 employees
- Applicant is an Employee Stock Ownership Plan (ESOP), as defined in 15 U.S.C. 632, with not more than 500 employees
- Applicant is a tribal small business concern, as described in 15 U.S.C. 657a(b)(2)(C), with not more than 500 employees
- Applicant is a business with more than 500 employees that is small under SBA Size Standards
In addition, there are several other legal disclosures that the Applicant will need to confirm on the SBA’s form when applying.
How is a Small Business defined?
While there is no broad definition for what makes a business small, the SBA’s size standards are mostly based on the average annual receipts or the average number of employees.
Real Estate, Rental, and Leasing businesses, however, do not have an employee restriction. These types of businesses usually only have to make no more than $7.5 to $32.5 million for their average annual receipts.
If you have any questions regarding what size standard your business fits, more information can be obtained from your nearest SBA Government Contracting Area Office. You can also contact the Office of Size Standards.
How much will I receive?
The amount of financial relief that you may be approved for depends not only on the severity or COVID-19’s impact on your specific business, but also on the type of loan you’ve applied for.
The SBA’s original EIDL program offers up to $2 million in financial assistance, and the first payment is deferred for 12 months. The long-term repayment structure of this particular loan offering allows for more affordable payments, with a maturity length of up to 30 years. The SBA determines and sets Terms on a case-by-case basis, based upon each borrower’s ability to repay.
The SBA’s EIDL Emergency Advance, specific to small businesses, offers capital up to $10,000, and the loan is forgivable if certain criteria is met by the business. This is anticipated to be the more popular option with thousands of small businesses already waiting in the wings to apply.
Either of these types of loans may be used to cover the cost of the below expenses, provided these areas are being affected by the COVID-19 disaster:
- Payroll (including benefits, like sick pay for affected employees)
- Accounts Payable
- Other Bills (like increased costs due to limited resources)
The interest rate is currently 3.75% for small businesses, however, that may change soon due to the Federal Reserve lowering interest rates.
What if I already have an Economic Injury Disaster Loan?
Businesses who may already have another type of EIDL can still apply to receive the SBA’s Emergency Advance, but the loans are unable to be consolidated as they are two different agreements with separate specifications.
If I’m approved, when will I receive the advance?
Once an SBA-approved lender deems an Applicant eligible to receive financial aid through the Emergency Advance program or another type of EIDL, it will be sent over to the Department of Treasury who will then disburse the advance to the small business owner, usually by mailed check.
The SBA has worked very quickly to streamline their application and approval process in regards to their Emergency Advance offer. They have committed to approving a successfully submitted application within 1-3 business days, however, the lending bank may take up to 1 week to release the funds to the borrower.
The SBA has also removed their usual personal guarantee requirement for borrowers along with temporarily relaxing the requirements for lenders to become SBA-approved.
What if I’m not approved?
If your application is denied, you will have up to 6 months to correct your submission and/or provide new information. A written request will need to be sent to the SBA for reconsideration of your loan application.
Where do I apply?
Directly on the SBA website. They have a specific COVID-19 EIDL application form that can be found here.
The EIDL Emergency Advance program is scheduled to end on December 30th, 2020, but the deadline to submit the application for a loan is December 21st, 2020.
Where do I find more information?
The SBA is making as many resources available as possible during this pandemic, including the below phone number and email address in addition to their website.
1-800-659-2955 or (TTY: 1-800-877-8339)