Article originally published March 17, 2020
Updated March 19, 2020
SBA Disaster Assistance Program for Coronavirus (COVID-19) Declared for Several Ohio Counties
As mentioned previously, the long-anticipated SBA disaster program has been approved for several states including Ohio. Please visit the SBA webpage for applications for eligible states and counties.
March 17, 2020
We are pleased to provide an update on the SBA disaster program as many are anxious to begin the loan process for the livelihood of their company. Each state governor has to make the request for the disaster hardship declaration for their state; as of 3:00 pm on Tuesday, March 17, 2020, Ohio was not on the list.
The SBA has created a webpage for “Areas Eligible for SBA Disaster Loans.” Additionally, the SBA has developed a one-page overview highlighting disaster loan details. An Ohio declaration form has also been made available which can be used as guidance for required information when applying. Please note this is not an application and is similar to a survey format to be used for Ohio only.
Below is a brief synopsis of the program and documentation expected to be needed to apply:
Program and Loan Details
- $50 billion in funding set aside for this program.
- $2M max loan, annual interest rate 3.75%, no prepayment penalties.
- Amount of loan and terms will be determined on a case by case basis.
- loans may be used to pay fixed debts, payroll, accounts payable, and other bills.
- The interest rate will be 3.75% for small businesses and 2.75% for non-profits, with a maximum of the 30-year payback period.
Each state governor has to make the request for the disaster hardship declaration for their state. See Areas Eligible for SBA Disaster Loans.
Each economic injury will be evaluated on a case by case basis. Once you are eligible for the program you will visit this webpage and fill out the application and submit the required documentation. The website and media will likely be the best place to get the most current and up-to-date information on the status of this program according to the SBA. They will not provide a copy of the application or the documentation request prior to being eligible.
Loans will be underwritten directly by the Federal SBA program similar to what they do for other disaster assistance programs (same program as getting assistance for Hurricane Michael, Florence, etc.). It is important to note that you will not go through a bank and be underwritten as you would with a normal SBA Loan. They are estimating several weeks for processing and evaluation period but could be longer based on the demand.
The required documentation will be similar to what is required by the SBA and other banks for underwriting, examples include:
- Business Loan Application (SBA Form 5)
- IRS Form 4506-T completed and signed by Application business, each principal owning 20% or more of the application business, each general partner or managing member, and for any owner who has more than a 50% ownership in an affiliate business
- Complete copies, including all schedules, of the most recent Federal income tax returns for the Applicant business
- Personal Financial Statement (SBA Form 413) completed, signed, and dated by the Applicant (if a sole proprietorship), each principal owning 20% or more of the Applicant business, each general partner or managing member
- Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used)
Additional Information that May be Necessary to Process Your Application
- Complete copies, including all schedules, of the most recent Federal income tax returns for each principal owning 20% or more of the applicant business, each general partner or managing member, and each affiliate when any owner has more than a 50% ownership in the affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management.
- If the most recent Federal income tax return has not been filed, a year-end profit and loss statement and balance sheet for that tax year is acceptable.
- A current year-to-date profit and loss statement.
- Additional Filing Requirements (SBA Form 1368) providing monthly sales figures.
What to think about:
- State governor has to make the request to get the program started, nothing available until then.
- Economic injury will be evaluated on a case-by-case basis. To that point, having a pulse on current and forecasted financial impact and the documentation to back that up should be something to have ready as part of the application.
- Overall, make sure the financial house is in order by having the current profit/loss statement, balance sheet and personal financial statement ready to go. You want to be able to react quickly, as it is expected there will be a run on this program.
Everyone is facing unprecedented economic hardships and conditions; patience will be needed as our government officials work through this challenging time. While you can rely on GBQ to communicate significant updates as we learn more, you are welcome to contact us at any time to discuss these matters.