SBA's Economic Injury Disaster Loans (EIDL)
Please see below resources and direction once Oregon is listed as eligible for the SBA Disaster funds. A recommendation would be to fill these out as early as possible, have your application items ready to go and keep checking the website to submit electronically. Even if you may think you may not need assistance.
SBA Disaster Portal to apply:
https://disasterloan.sba.gov/ela/
Disaster Loan Assistance Available:
Economic Injury Disaster Loans (EIDL’s) – Working capital loans to help small businesses, small agricultural cooperatives, small businesses engaged in aquaculture, and most private, non-profit organizations of all sizes meet their ordinary and necessary financial obligations that cannot be met as a direct result of the disaster. These loans are intended to assist through the disaster recovery period.
Who can apply:
o Most industries but still have to qualify under SBA’s size standards which are:
o Tangible net worth of business (and affiliates) must be within $15 million;
o Net profit after taxes of business (and affiliates) must average over 2 years $5 million or less;
o Private, non-profits;
o Passive businesses qualify (e.g. rental properties, etc.);
o Individuals;
Who is NOT eligible:
o Agriculture enterprises (agricultural related businesses eligible);
o Religious or charitable organizations;
o Casinos/Racetracks;
o Businesses whose gambling income is greater than one third of their revenues;
Credit Requirements:
o We’ve been told SBA is mainly using a scoring system (Experian) to make decisions but they haven’t told us their minimum credit score – not cash flow (more to come as we receive written information);
o Credit History – Applicants must have a credit history acceptable to SBA;
Collateral:
o Collateral is required, if available, for all EIDL loans over $25,000 (loans for $25,000 & under NOT required). SBA will take real estate as collateral if available (same parameters as under regular 7(a) program). SBA will NOT decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available (possible non-RE as well);
Determination of loan amount:
o Two phases or options that businesses will be considered under:
o Phase I – 85-90% of businesses will fall under this category and loans can be made up to $500,000:
§ Loan amount determined by taking Gross Profit of business (Gross Revenues less Cost of Goods Sold) divided by 2 (i.e. 6 months) = working capital up to maximum of $500,000;
o Phase II – more financial detail will be required to qualify under this phase. The maximum loan amount is $2 million including all affiliates of Applicant.
o Even if borrower has maxed out their SBA guaranteed loans they can apply under this program and it will not count toward their maximum SBA guaranteed funds available (typically $3.750M);
What use of proceeds CAN be used for:
o Working capital for fixed expenses such as rent, payroll, accounts payable, debt payments (but cannot refinance the whole debt with this money unless short-term debt/lines of credit used for working capital), other payments;
o Can be used to refinance short-term loans that have a balloon payment coming due (they didn’t specify the length of maturity that would be eligible – stay tuned);
o Refinance interim (bridge) loan made by bank for working capital during disaster including an SBA Express LOC;
What it CANNOT be used for:
o Dividends/Bonuses;
o Disbursements to partners unless their normal salary;
o Shareholder loans;
o Expansion of business;
o Payoff fixed assets (equipment/real estate); CAN be used for payments on their equipment, real estate, other fixed assets;
o Repairs to real estate;
o To refinance long term debt;
o To payoff direct federal debt, i.e. other SBA loans, or other disaster loans);
Terms/Repayment:
o 30 year terms with NO payments for first year (interest still accrues);
o 3.75% rate for small businesses;
o 2.75% for non-profits;
o No prepayment penalties;
How to apply, Borrower will need the following when they apply at portal;
o SBA Loan Application (SBA Form 5) – attached;
o IRS Form 4506T (see page 4 of Form 5 as to who needs to complete/sign this form) – attached;
o Most recent federal income tax return including all schedules;
o If federal taxes are not filed for 2019 will need FYE balance sheet & profit/loss statement;
o Interim profit & loss;
o Schedule of liabilities (can use SBA Form 2202) - attached;
o Personal Financial Statement (SBA Form 413D) – (see page 4 of Form 5 as to who needs to complete/sign this form) - attached;
o Electronic is the fastest;
o If applying for more than $500,000 Borrower will have to complete/submit additional information;
Borrower should:
o Retain ALL receipts they paid with the disaster funds for 3 years;