FAQ

SBA Disaster Loans FAQs + Unanswered Questions

Last Update Time: 04/14/2020

Introduction: Since the SBA COVID-19 Loan program was released on March 16, 2020 we have begun the process of becoming educated on submitting a successful application. Below is a list of questions we were able to cross reference with either the SBA website or through conversation with the SBA office directly.

If you need help with clarification on any of the following, please contact the SBA loan office directly at: 800-659-2955.  We do recommend that you state you will record the call on the phone so you have it as backup in case the loan officer asked you to source your document.

Disclaimer: As we are constantly updating this as soon as new reports come out, note that the information may not be 100% complete and may be subject to change. To clarify your answers, we highly recommend you reach out directly to the SBA loan office at 800-659-2955.

FAQ Detailed Answers

What is the deadline to submit your applications to the SBA for the Economic Injury Disaster Loan COVID-19? 

UPDATE as of 04-11-2020 it seems that the website where each state was listed and with it their deadlines to apply, is no longer available. In the interim, based on this official resource, it seems the last day to apply for the EIDL is 12-30-2020 and we assume this means that it is applicable for all states.  (see resource here page 2)

Every State will have a different filing application deadline for the Disaster Loan EIDL 7(b)

See resource here

If you wish to find the Filing Deadline for your State, follow the instructions:

• Click on the link here
• Find the State you are inquiring about.
• Click on the link under Coronavirus (COVID-19) next to the State under (Incident Column)
• Click on the Fact Sheet
• The Application Filing Deadline will be displayed there.

What changes were made to the SBA Site?

The SBA recently made significant changes to their SBA Disaster website and SBA 7(b) Loan Application Process.  The new site should be much faster for you to use, as instead of going screen-by-screen, you can upload completed paperwork to a Dropbox.  You will be filling out the same forms as previously, but you may not be required to submit as many forms and supporting documentation, including prior year tax returns.

What paper forms need to be submitted to ensure it is complete?

Update as of 04-07-2020

It is recommended to have ready the following forms to avoid any hold up in reviewing the application:

• Main Form
  • For A Business: SBA Business Loan Application 2020
  • For a Schedule C: SBA Disaster Home / Sofe Priorietor Loan Application
• SBA Form 2202 Schedule_of_Liabilities
• Schedule of Liabilities Instructions
• SBA Personal Financial Statement (Form 413)
• EIDL Additional Requirements – Form 1368
• IRS 4506-T SBA

Are electronic signatures allowed on docs, or do we need to have them sign a wet signature and upload?

• Must have wet signatures
• Don’t accept electronic signatures
• Need to print, sign and scan back to upload.

How to process the application

The first part of the application as of the latest update by the SBA, is to go here and complete the initial part of the application online.

 

Important: This is just the beginning of the application process. This step is basically allowing the SBA to receive your intent to apply as well as opting in for the emergency cash advance of up to $10,000.00.

Once the application has been assigned to the loan officer, they will notify you or the applicant if the information in the application is theirs, what other documents will need to be completed and how to submit them.

How will the client give authorization to the SBA to discuss applications with a third-party?

Indicating the information of the preparer under Section 21 of the application, is not only disclosing who helped prepare the application but also giving them authorization to discuss all matters concerning the application with the SBA unless the box indicating “NO” is checked.

No other form is required to give authorization

[Important to remember that all forms must be signed physically by the applicant. No electronic signatures are allowed]

How to Email in an application (Update: as of 03-30-2020 the first part of the process is to complete the initial application on the SBA website, see here, and once the loan officer is assigned to your loan, you will receive instructions how to submit the rest of the package)

• Email to: disasterloans@sba.gov
• Subject line: Application Number, Small Business Name
• THIS IS THE RECOMMENDED OPTION

Security concerns while sending applications by email: can we send applications by email with a secured link? Shared folder access etc?

• No Secured links can be sent by email to the SBA nor invitation to join a shared folder. All secured emails will be rejected and not opened by them.
• All emails sent to the SBA must be unsecured emails.
• Attachments must be PDF format and less than 5MB in size.
• If you are concerned about sending sensitive documents via email, it is recommended you submit using their website online registration (when available again), by fax or by certified mail with signature required.

Click here for resources about the different methods to send the applications (confirmed via phone call with SBA on 03-28-2020)

How to prepare the packages to send to the SBA, even if you decide to upload through their site, email, fax or send by certified mail signature required

As of the latest update on 03-30-2020 on the SBA website, the initial part of the application is through the SBA website, see here.

After that, The SBA Loan officer will instruct how to submit the forms, and other supporting documentations.

There is no recommended method to send the packages. It is recommended; however, that all documents prepared within the package should include identifying information on the top right corner in the case the package is separated.

EX: XYZ Company LLC EIN # 01-2345678 EIDL COVID-19 PG 1/50

 

How to submit application through SBA site (if a secured link is enabled for you to do so per the instructions of the SBA Loan officer assigned to your loan)

• Just need to include the file names of Application number + Small Business Name, EIN

How to submit via fax (if you are required by your SBA Loan Officer to do so)

• Cover Page: Application Number, Small Business Name, EIN number or SS#
• Fax Number 202-481-1505

How long will it take to review and grant an application number?

• 1-2 weeks; they are slammed.

Can the clients sign and scan themselves and send to the accountant for them to upload to the site?

• Client needs to sign and scan back to the accountant. Accountants can upload but need to have the Subject line of the Small Business Name.
• If you are submitting multiple applications, Its recommended to either send via email and cc client or submit individually to the site directly.

 

Are All previously submitted applications processed and do not need to be re-submitted?

• They do not need to be resubmitted

Are Any partially completed applications no longer going to be available and an entire new application needs to be submitted?

• You can use the same application number but resubmit all forms.

If someone gets the SBA loan (b); but then tries to go for the Loan (a) in the new bill, will they be allowed? Should we instead have them hold off on submitting the (b) until (a) gets passed?

• They are unsure how the process will work at this time. They have not heard of the loan forgiveness happening for the SBA loans either, but are expecting it may come later.

How long will the process take?

• Will take 1-2 weeks to receive the submitted application.
• Will then take 6-7 weeks until the loan officer is assigned.

What other implications are there if someone applies for the SBA loan now or wait for 2T bill?

• They recommend submitting the application now anyway, to start the process asap.

How should the files be named, organized to Box to keep it clean and organized as possible for the Loan Officer?

• Just by the application number, if you have it plus the small business name. If you do not have the application number, then you will just put the small business name and EIN number on the top right corner of each page you submit.

Once they upload one document to Box, will that create an account where they can add the other documents?

• No, an account will not be created. Need to try and upload all at one time. This is only a temporary solution.

Should they upload the additional (unrequired) documents like 4506-Ts or wait until they are contacted by a loan officer.

• Yes, they recommend submitting everything at the beginning to speed up the process.

If the accountant is listed as an alternative contact, will the loan officer contact them or the applicant?

• They will be calling the client. The loan officer does not want to speak to the accountant without the client on the line.

Confirm that the email and phone to add on the actual application can be the accountant’s or person filing the application. 

• Needs to be the client, not the accountant

Who is eligible for the Economic Injury Disaster Loans?

This is a Working Capital Loan Program which is used to cover normal business expenses such as rent, payroll, A/P, etc.

To be eligible for the loan:

• The business must be located in one of the counties for a State that has been declared a Presidential and SBA Agency Disaster Area.
• It must be a small business, agricultural co-operative, or private not-for-profit.
• There is the expectation that they can repay the loan.
• The business must have suffered substantial economic damage.
• Must be considered a small business. To review the requirements, click here.

What are the loan terms?

Specific Loan:  SBA Economic Injury Disaster Loan (EIDL)

Loan Amount:  Up to $2 million (but that limit can be extended for certain situations, such as for large local employers).

Loan Term:  Up to 30 years, but loans of 7 years or 15 years are not uncommon.

Interest Rate: 3.75% (Fixed) for small businesses, 2.75% (Fixed) for not-for-profits.

Repayment Schedule:  Typically monthly.

First Payment: Payment can be deferred for up to a year (interest still accrues).

Loan Fees: SBA does not charge points, closing, or servicing fees (there are no fees associated with these loans charged by the SBA)

Loan Approval Time: Estimated loan processing 21 days after completed application is received.  First payment in 5 days.  Total turnaround time is approximately 30 days.

First Payment:  First check for up to $25,000 about 5 days after approval.  Subsequent payments will be worked out between you and your SBA case officer.

Collateral:  Generally required for loans above $25,000.  The loan will not be denied if there is no collateral.  Collateral can be real property, machinery & equipment, etc. 

Where can I find the declared disaster areas?

Find the most up-to-date listing of Coronavirus (COVID-19) declared disaster areas here.

Where do we apply for the loans?

You can apply for the loan online here. 

What documentation is required for a loan?

Each online or paper application will include the following documents:

• SBA Form 5, Disaster Business Loan Application (Updated to 5/18 version of form on 3/25/2020)
• SBA Form 413, Personal Financial Statement

One Form 413 is required for the applicant, each limited partner who owns 20 percent or more interest, each general partner, and each stockholder owning 20 percent or more voting stock.

• IRS Form 4506-T, Tax Information Authorization
• SBA Form 2202, Schedule of Liabilities
• SBA Form 1368, Additional Filing Requirements for EIDL
• You can provide additional information if you want to clarify facts or have a unique aspect to your business that you would like the loan officer to consider.

Note:  Insurance information requests refers to business insurance, not personal insurance.

Who is a good candidate for a disaster loan?

• Does not have a poor credit score (640 or above)
• Has not defaulted or had a poor performance on prior federal loans or obligations such as VA, FDA, prior SBA loans, or student loans.
• The candidate is not in bankruptcy. Prior bankruptcy will not disqualify a candidate.
• Generally have a 1.25 times or better debt service coverage ratio.

What businesses are eligible for the disaster loan?

To be eligible for the loan:

• The business must be PHYSICALLY located in one of the counties for a State that has been declared a Presidential and SBA Agency Disaster Area.
• It must be a:
  • Small business
  • Agricultural co-operative
  • Private not-for-profit
• There is the expectation that they can repay the loan.
• Must have a business that has suffered substantial economic damage.

Substantial economic injury means the business is unable to meet its obligations and to pay its ordinary and necessary operating expenses. EIDLs provide the necessary working capital to help small businesses survive until normal operations resume after a disaster.

Examples of businesses that are eligible for the disaster loan as long as they have a brick and mortar location with all business licensing, legal documents, and financials up-to-date, they can be considered for the loan.

• Businesses within the Medicare and Medicaid industry.
• Strip clubs have a brick and mortar location, therefore they are eligible to apply

[Resources from phone call on 03-27-20 with SBA representative]

Are companies with untapped LOC eligible?

Having an untapped LOC does not render them ineligible but. If they have credit available elsewhere, the loan office will make final determination by looking at the company as a whole and whether you have enough resources to keep the business running for a specific period of time. SBA encourages everyone to apply. (Resources: phone call with SBA representative on 03-28-2020)

Can someone who is self employed who doesn’t own a dba or an llc but has just been getting paid with checks and cash into their personal account qualify for a disaster relief program? Can a Sole Proprietor apply for an SBA Loan?

YES – Solepropietors complete form 5C  along with all the other required documentation. Refer to this page for the additional forms required. They will need to provide the same level of documentation as an established company.

Also, important to note: if your client has an LLC but they are sole owners and they file taxes for this entity under schedule C, they also need to complete Form 5c

Would a self employed qualify for a forgivable loan? Where would the payroll be coming from specifically?

Since they don’t have an established company they need to report all the gross annual income (the money they get from their clients and deposit in their personal account or cash, they will not qualify for payroll forgiveness loan, but they qualify to apply for an economic injury loan. (**both subject to final underwriting process once a loan officer is assigned)

Can a 100% subsidiary of a foreign company apply for the SBA loan?

As per SOP 50-30-7, Chapter 4, Applicant Eligibility for Economic Injury Disaster Loans, there can be no more than 49% participation by foreign business concerns, the company needs to be located in the United States, operate primarily in the United States, and make a significant contribution to the U.S. economy through payment of taxes and/or use of American products, materials, and/or labor.

What is considered a “small business” for the disaster loan?

It must be a small business (or agricultural co-operative, or private not-for-profit).  Typically this means a business that generates less than $750,000 to $38.5 million in annual revenue and has fewer than 100 to 1,500 employees, which varies by industry.

IMPORTANT NOTE:  You only have to meet one of the qualifications, not all of them, to be considered a small business.  For example, if your annual revenue meets the definition but your average net income is too high, you would still be considered a small business for the purpose of the disaster loan.

The table of size standards can also be found online in the small business size regulations set forth in the Electronic Code of Federal Regulations.

You can also check whether your business is small using the size standards tool.

Certain government programs, such as SBA loan programs and contracting opportunities, are reserved for small businesses. In order to qualify, businesses must satisfy SBA’s definition of a small business concern, along with the size standards for small business.

What is a small business size standard?

A size standard, which is usually stated in number of employees or average annual receipts, represents the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA and federal contracting programs. The definition of “small” varies by industry.

How to calculate your small business size

Size standards are mostly based on the average annual receipts or the average number of employees.

• How does SBA calculate annual receipts?
• How to determine number of employees?

How long must a business have been open to be eligible?

The requirements for the loan do not specify how many years your business needs to have existed. However, an application could be turned down because there is not enough information for them to make their evaluation and determination, including sufficient operation and financial history.

What businesses are not eligible for a disaster loan?

Ineligible EIDL Applicants:

1. The following applicants are not eligible for EIDL assistance.
2. Lending or Investment Concerns (except for real estate investments held for rental)
3. Multi-level Sales Distribution (Pyramid) Concerns
4. Speculative Activities
5. Non-profit Organizations that are not considered a Private Non-Profit
6. Consumer and Marketing Cooperatives. However, other cooperatives and small agricultural cooperatives meeting applicable size standards are eligible
7. Not a small business concern (except for PNP of any size)
8. Gambling Concerns. Concerns that derive more than one-third of their annual gross revenue from legal gambling activities
9. Casinos, Racetracks, Etc. Businesses whose purpose for being is gambling (such as casinos, racetracks, poker parlors, etc.) are not eligible for EIDL assistance regardless of their ability to meet the one-third criteria established for otherwise eligible concerns
10. Loan packagers who derives more than one-third of their annual volume from the preparation of applications seeking financial assistance from SBA
11. Religious Organizations.
12. Political or Lobbying Concerns.
13. Pawn shops, when 50 percent or more of previous year’s income was derived from interest
14. Real Estate Developers. Establishments primarily engaged in subdividing real property into lots and developing it for resale on their own account.
15. Life Insurance Companies.
16. Concerns Engaged in Illegal Activities (as defined by Federal guidelines).

            This includes the Cannabis Industry.

1. Government-owned concerns, except for businesses owned or controlled by a Native American tribe.
2. Concerns with Principals Incarcerated, on Parole or Probation: remain ineligible if the parole or probation is lifted solely because it is an impediment to obtaining a loan.
3. Concerns engaged in live performances of, or the Sale of Products, Services, of a Prurient Sexual Nature.
4. Businesses considered as hobbies.
5. Concerns Not Located in the Declared Disaster Area.
6. Concerns Determined by SBA to have Credit Available Elsewhere.
7. Concerns Involved in Change in Ownership Situations: Concerns which had a substantial change of ownership (more than 50 percent) after the impending economic injury became apparent, and no contract for sale existed prior to that time are ineligible
8. Concerns Established Post-Disaster: If a small concern was established after an impending economic injury became apparent, the owner assumed the risk and did not incur economic injury.

Is there a loophole in the application for Religious organizations?

Religious organizations are not eligible to apply. However, if that religious organization provides secular social services that are non religious activities, like for example soup kitchen, homeless pantry etc, and they have an actual location for this, then they could apply.

Are companies with liens and judgements not eligible to qualify?

No. Per the SBA, Liens and Judgements are automatic disqualifiers.

Am I able to charge for filling out the loan application?

When you apply for an SBA loan, you may use an attorney, accountant, engineer, appraiser or other representative (who are considered agents/loan packagers) to help prepare and present the application to us. You are not required to have representation. If an application is approved, you may need an attorney to help prepare closing documents.

Fees to representatives must be reasonable for services provided in connection with the application or the closing and based upon the time and effort required, the qualifications of the representative, and the nature and extent of work performed. Representatives must execute a compensation agreement.

In the appropriate section of the application, you must state the names of everyone employed by you or on your behalf. You must also notify the SBA disaster office in writing of the names and fees of any representative you employ after you file your application.

Fees should not be charged based on the approval of the loan.

Could an applicant be turned down for the loan?

Yes, some common reasons:

• Does not have a physical presence in the disaster area, a P.O. Box is not sufficient.
• Has not suffered substantial economic harm. Substantial economic injury means the business is unable to meet its obligations and to pay its ordinary and necessary operating expenses.
• Has a poor repayment history or has defaulted on prior federal loans, including VA, FHA, and Student Loans
• Is currently in bankruptcy, prior bankruptcy, particularly of more than two years ago, may not preclude a loan
• Has a poor credit score (usually less than 640)
• Is not expected to be able to pay back the loan

If you are married, whose income (taxpayer, spouse, joint) is used in the Personal Financial Statement (SBA Form 413)?

Per the form instructions: Applicant, including the assets of the owner’s spouse and any minor children.

A separate form is required for:

• Each proprietor
• General partner
• Managing member of a limited liability company (LLC)
• Each owner of 20% or more of the equity of the Applicant (including the assets of the owner’s spouse and any minor children)
• Any person providing a guaranty on the loan

Where do I write the amount I need on the application?

On the SBA Disaster Loan Application, you will not be asked to input a requested amount for the loan. This will come as a secondary process after the initial loan application is submitted, most likely, once the loan is assigned to the corresponding SBA Loan Officer who reviews the submitted application.

May I request an increase in the amount of an economic injury loan?

SBA will consider your request for an increase in the loan amount if you can show that the increase is essential for your business to continue and is based on events occurring after SBA approved your original loan which were beyond your control. For example, delays may have occurred beyond your control which prevent you from resuming your normal business activity in a reasonable time frame. Your request for an increase in the loan amount must be related to the disaster for which the SBA economic injury disaster loan was originally made.

How can my business spend my economic injury disaster loan?

(a) You can only use the loan proceeds for working capital necessary to carry your business until resumption of normal operations and for expenditures necessary to alleviate the specific economic injury, but not to exceed that which the business could have provided had the injury not occurred.

(b) Loan proceeds may not be used to:

(1) Refinance indebtedness which you incurred prior to the disaster event;

(2) Make payments on loans owned by another federal agency (including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act;

(3) Pay, directly or indirectly, any obligations resulting from a federal, state or local tax penalty as a result of negligence or fraud, or any non-tax criminal fine, civil fine, or penalty for non-compliance with a law, regulation, or order of a federal, state, regional, or local agency or similar matter;

(4) Repair physical damage; or

(5) Pay dividends or other disbursements to owners, partners, officers or stockholders, except for reasonable remuneration directly related to their performance of services for the business.

Do I have to be a CPA to prepare the financial statements for the loan?

No, you do not have to be a CPA to prepare the financial statements.  We also recommend that you specify in your engagement letter, and make clear to your client, that you are not providing them any Review, Compilation, or Audit services.

You are basically requesting, organizing, and presenting historical and projected financial information, as provided by your client, for the purpose of filing out the loan application.

You should also be sure your engagement letter states that you are not auditing or verifying the information that your client is providing you.

You do not have to be a CPA in order to perform those services.

Does SBA charge any fees for obtaining a disaster loan?

SBA does not charge points, closing, or servicing fees.

How do you repay a disaster loan?

To make a one-time payment or schedule recurring monthly payments, register on Pay.gov and select the 1201 Borrower Payments option.

There are several ways you can make a payment on your disaster loan: by phone, by mail or online. To make a payment, contact the SBA disaster customer service center at 1-800-659-2955 (TTY: 1-800-877-8339). There is no fee for this service.

You may also send a check or money order to the SBA. Please include your loan number on your check and your payment coupon, if available. Make your check payable to the U.S. Small Business Administration.

Is collateral required for these loans?

Loans which exceed $25,000 must be secured to the extent possible. SBA will not decline a loan if you don’t have enough collateral, but will ask for whatever collateral is available which may include real estate owned by a business’ principals. We may also take a lien on the damaged residential property.

 

Are PDF attachments allowed in the online application?

Yes, much of the data required can either be filled in online or attached as PDFs to the document.

You may find it more efficient to prepare the paper documents of the SBA Forms ahead of time, and then upload them as PDFs when you are filling out the online application.

How do I justify my fee to my client for filling out the application?

In many cases your client is in risk of losing their investment, often their life’s work.  Are they willing to gamble that they can properly complete the application?  This is an investment in their investment.

In addition, you are doing more than just completing a loan document, to complete the application you may also include:

• Obtaining Your Tax Return Transcripts from the IRS
• Organizing and Reviewing Existing Tax Returns
• Compiling Monthly Sales Figures
• Preparation of Profit & Loss Statement for Application
• Preparation of Personal Financial Statements for Applications
• Schedule of Liabilities Listing All Fixed Debt
• Assistance in Completion of All Loan Documents
• Assistance in Addressing Response from the Small Business Administration

This is a significant amount of work.

If the tenants are not paying, can the rental owner apply for the SBA disaster loan?

Yes, if a landlord will suffer economic injury because their tenants cannot pay their rent (because of the virus), the landlord should prepare a separate application for each separate, legal rental property.  In other words, if you have three rentals, each with their own LLC, you need to file 3 separate applications.

Rentals reported directly on the taxpayer’s tax return, should categories the business as a sole-proprietorship and file the SBA Form 5C instead of the Form 5.  The online application will present the correct questions (forms) based on the answer to the type of business entity.

Can Real Estate agents apply for a disaster loan?

Yes, if they are no longer able to meet with clients, real estate agents can apply for the SBA disaster loans.

Can Real Estate Investors apply?

If the investor claims the income from the properties on their tax return and has a brick and mortar location in a declared disaster zone, they can apply.

(Resource, phone call with SBA on 03-27-2020)

How long should we assume the COVID-19 disaster will last; what is the duration of time we should be applying for in the loan?

There is no SBA-defined end date.  You can project what you believe you need now, and seek more funds later if the disaster continues longer than anticipated.

Will an SBA loan officer reject a loan because the loan amount is too high, or as a matter of course, suggest (or approve) a loan for a smaller amount?

The SBA loan officer will not reject a loan because the amount requested was too high.  Instead they will approve for a lower amount.  For example, if you ask for $100K, instead of rejecting the loan application, they may offer you $60K instead.

Does someone at a not-for-profit need to personally guarantee the loan?

No they do not.

Nonprofit organizations – additional notes

• Government owned non-profits are not eligible.
• The applications must be signed by an authorized executive of the organization, CEO, CFO etc.
• In the case of the nonprofit organizations, the personal financial forms for the executive signing the application is not required nor personal guarantees.
• Every other document listed in the applications is needed (except the personal guarantees and personal financials of that executive of the nonprofit signing the application)
• All private nonprofit organizations are encouraged to apply and their assigned loan office will make the final decision.
• Form 4506-T must be completed by the non-profit organization as well listing the correct calendar year that applies to them, and the SBA will be able to retrieve the transcripts accordingly. (Resource – phone call with SBA on 03-28-2020)

Does this loan have a prepayment penalty like a regular SBA loan?

No, they do not.

Can a business in the Cannabis Industry apply for an SBA disaster loan?

No, a business in the cannabis industry would not be eligible as it is not a federally approved place of business. (CBD businesses are considered part of the cannabis industry since it is a derivative product) see fda resources here

The SBA has stated that because marijuana is still illegal at a federal level, businesses in the cannabis industry are not eligible for the Economic Injury Loan

Have credit requirements been relaxed for these SBA disaster loans, compared to the disaster loans before COVID-19?third

Unknown.  As of 3/21/2020 credit requirement changes have not been communicated to the SBA disaster loan customer service team.

Does the credit score for a business matter, or just for the guarantor of the loan?

The only credit score reviewed is the personal credit score for the applicant(s), not the business.

Will there be a problem if the same email address is used to register multiple clients?

Yes, this will cause a problem.  You should use a unique email address when registering. Each applicant should have their own registration within the SBA website if applying online. Accountants/Bookkeepers cannot create one registration and apply for several businesses / applications within one online registration.

Only if the applicant owns more than on business, can he apply for more than one business using the same online registration, but only if they have ownership in the business applying for the disaster loan

Is there a maximum cap on the number of businesses, or businesses in a state or county?

No, there is currently no cap on the number of businesses, but there is a cap on the amount of money available for disaster loans – currently $8.3 Billion.

If a third-party fills out the application and the SBA has questions, do they contact the applicant directly or the third-party?

SBA will contact the business owner directly as the relationship is with the business.

If the applicant already has other loans which have liens on their properties and/or other business assets, are they still qualified for the loan?

Yes

If a client has existing SBA (non-disaster) loans with the SBA, do the SBA disaster loans count against the SBA $5 million personal loan cap?  (This $5 million cap is only applicable to non-disaster SBA loans).

No, the regular SBA and the SBA disaster loans are two separate and distinct programs.  Any loans given through the SBA disaster loan program will not count against any loan caps for the regular SBA loans.

Given the high volume, are we still expecting loan processing to be 2-3 weeks?

Yes, about 21 days to process. If approved, another 5 days to disburse.  Approximately 30 days total.

Where do I apply if my business has operations in several states?

If you have a business with operations in several states just apply once, not in each state.

The application should be filed only for the headquarters state and county location.

Does a separate application need to be submitted for each business entity?

Yes, each business entity requires a separate loan application.

Is there a current workaround to upload requested loan documents to the application?

Yes, there is a current workaround.  Here are the steps:

• Remove the email address on the application by going to “My Account” and then “Contact Information”. Click Save.
• Upload requested documents.
• Once uploaded add the email address back to the application.

What does “salary” represent on the Personal Financial Statement?

Salary represents income paid to the individual.  This includes income from all business entities (if multiple entities are owned).  Income is combined for those filing jointly.

Corporation has 2 shareholders who have majority interest. Are both shareholders required to submit personal financial statements?

Personal financial statements will be required for (each):

• Proprietor
• General partner
• Managing member of a limited liability company (LLC)
• Each owner of 20% or more of the equity of the Applicant (including the assets of the owner’s spouse and any minor children)
• Any person providing a guaranty on the loan

Therefore two majority shareholders would both have to submit personal financial statements.

How do we complete Form 4506-T?

Do we complete one for Personal and one for Entity?

Yes, one for the personal return and one for the entity

What forms are we requesting and can we request multiple form types on one 4506-T?

Multiple years can be on one 4506-T, but not multiple Entity Types.

The SBA will want the last three years (2018, 2017, 2016) for the entity and the last two years (2018, 2017) for the Individual

The Individual will want the Form 1040 (Not payroll or other tax types)

The Entity return will be:  1120, 1120S, 1065, or 1041

Which boxes do we check on #6?

Check box 6c

Can we get this eSigned?

No the Forms submitted to the SBA should have a “wet signature” and should not be eSigned.

Should we still submit if they haven’t filed 2018 or earlier? Or should we complete the tax return first and then submit?

We would recommend Getting the 2018 and prior returns prepared. They won’t need the 2019. Otherwise you will need to do the proforma information.

You mentioned, if they haven’t filed a recent tax return, we can do a proforma or projected amount. What format should that be? Is that a proforma tax return or some other statement?

We don’t have a special forma for the proforma information, but generally income statement and balance sheet – probably right out of Quickbooks would be fine.

Do we need to submit the state returns?

The haven’t asked for state return, it is a federal program and the state level programs are separate.

It looks like they want the 4506-T for both business and personal. Do they want a copy of the personal tax returns as well? It only says business in that section.

They only want a copy of the most recent business return (with all forms and schedules). They don’t ask for, or have a defined spot for, and uploaded version of the Individual return.

If we have someone who is a majority owner in two businesses and we submit an application for both businesses, will it hinder their ability to qualify because their personal information is on two applications?

The situation with two businesses should not hinder anything. They should be filling out two applications, so they are treated separately for SBA loan purposes.

When should we apply for the 7(b) loans?

SBA regional director:  Start the disaster loan application now

Source: Albany Business Review (3/23/2020)

I know certain industries are not allowed to get loans (gambling, cannabis, etc) but had a prospect ask about the “adult industry” i.e. he’s an investor in a strip club. Anyone know??

If the business, although categorized as an “adult industry” , have all of the proper business licensing, and are legally run, up to date financials, etc. and have a brick and mortar location, they are eligible and can be considered for the loan.

Do you have to certify you’ve been affected by COVID-19? What does it mean to make a good faith certification?

When you are signing the SBA Form 5 or 5c loan application, you are giving good faith certification not only that you have entered all the information to the best of your knowledge but that you also believe you are or will be affected by COVID-19. By providing all the documents required, and signing the corresponding forms, you are giving good faith certification.

What is the procedure to follow with clients that own several businesses very similar? And need to apply for each business?

If the legal entities are owned by a single parent company, you can submit the application for the parent company, and list the different legal entities as “affiliate businesses” in the application. If each business legal registered entity is individually owned (even if all by the same individual) then there needs to be separate applications for each entity. [resource: phone call with sba on 03-27-2020]

When applying for the Economic Injury Disaster Loan – does the corporation apply or the individual owner apply?

The application will require the owner that is the main guarantor to apply along with the corporation. In the case of multiple owners who own more than 20% each, then the information of those owners will need to be included along with personal financials. However, only the main guarantor will sign the business application forms and form 4506-T for the business itself.

When completing the forms, Is Salary Gross or Net?

Gross Salary

When completing the forms, is Real Estate Income Gross or Net:

Gross Real Estate Income  [resource phone call with SBA representative on 03-26-2020]

Bankruptcy: Can individuals with previous bankruptcy apply?

Everybody can apply even if they have filed bankruptcy. During the underwriting process the loan officer will determine final eligibility.  *resource phone call with SBA representative on 03-26-2020*

Form 8821 is not required at least in the initial part of the application process

No form 8821 is required. Refer to the SBA List of required Documents section where it shows all the current forms required. If a form 8821 is required could be at a later point when the loan officer is working during the underwriting process but form 8821 is not listed as required to initiate the process.

What citizenship status can apply for the loans?

Legal Aliens are eligible. However, consideration is given to the type of status possessed (Resident, etc.) in determining the degree of risk relating to the continuity of the applicant’s business. Excessive risk may be offset by full collateralization. Will discuss in specific detail with call which specific visas are NOT eligible if any. Important to note: USCIS Form G85 is required to be submitted in these cases for verification of citizenship.

Resource Click Click Here – Under “Special considerations”

Can individuals under DACA apply?

SBA representative informed us by phone today that as long as the individuals have their taxes up to date they should apply. Many individuals under DACA own business, so their businesses must comply with all the requirements as any other business that applies. (resources – phone call on 03-29-2020)

Owners with ITIN and no Social Security

There are several points to consider and as every other application, it will be subject to final underwriting process via a loan officer, but, if you are applying for your business, and if you are an individual currently with an ITIN and no social security has been assigned to you, but you fit the criteria below, you can apply:

• Your client is the owner of a business that does not have more than 49% participation of foreigners including the ITIN holder.
• The business is located in the US and has a brick and mortar business location.
• Business has all their tax filings up to date and all other documentation.
• Your client has filed the corresponding 1040-NR taxes.
• If applying for 7(b) you will need to include any partners with more than 20% ownership in the business and they will have to be personal guarantors in the loan as well as provide personal financials
• You might already have a work visa or an investor visa in the US but you are in that period of time where you don’t have Social Security yet, and only and ITIN.

If your clients meet most of the above criteria, they should apply.

(It is not clear yet what are the details concerning individuals with ITIN referencing the CARES ACT. We will keep researching and updating our notes accordingly to share with you)

Per phone call with the IRS, A non US Citizen in the US on a business visa, filing taxes, and who owns a business ran and operated in the US in a declared disaster zone, is eligible to apply.

Can my client use the loan proceeds to pay on his $2.5 million federal tax bill?

Loan proceeds may not be used to:

(1) Refinance indebtedness which you incurred prior to the disaster event;

(2) Make payments on loans owned by another federal agency (including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act;

(3) Pay, directly or indirectly, any obligations resulting from a federal, state or local tax penalty as a result of negligence or fraud, or any non-tax criminal fine, civil fine, or penalty for non-compliance with a law, regulation, or order of a federal, state, regional, or local agency or similar matter;

(4) Repair physical damage; or

(5) Pay dividends or other disbursements to owners, partners, officers or stockholders, except for reasonable remuneration directly related to their performance of services for the business.

Do  we know if churches are eligible for the payroll Tax forgiveness?

All entities should qualify as long as they had W2 employees and paid the corresponding employer taxes

The emergency grant applies to the 7b Economic Injury Disaster Loan (EIDL) or is it through the 7a Paycheck Protection Program (PPP Loans)?

The $10,000.00 emergency grant is for the EIDL COVID-19 application.

            IMPORTANT updated as of 04/07/2020 email with the SBA representative Kat Ford

The SBA has confirmed that their goal is that within three days of your application being accepted and reviewed, if you are approved for the grant, your funds should be disbursed.

This means that when you submit the initial eligibility verification on the EIDL Loan Application Website, and check the box to be considered for the emergency grant, you are placed into a queue. Your application has not yet been received. Once you are officially contacted by an SBA Loan Rep via email, this confirms your application has been initially reviewed and received, and the goal is from this moment, to have your emergency funds disbursed if you were approved for the grant.

Being denied the grant does not mean you have been denied the loan, and vice versa, being approved for the grant does not guarantee you are approved for the loan.

The SBA rep did caution that because of the overwhelming number of applications, the SBA maintains their “goal” of disbursing these emergency funds within three days of application acceptance, but this just may not be the case. Additionally, they could not give any time frame of how long it will take between initial application submission and when an SBA Loan Rep will reach out.

The SBA confirms that there are no obligations to accept any loan terms offered (even if you already received the emergency cash advance) and that the grant remains forgivable under all circumstances. 

As a result of the CARES Act signed into law by the President on March 27^th, eligible small businesses in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan Advance Loans of up to $10,000.  This advance is in addition to the traditional Economic Injury Disaster Loan and requires you to complete a short application available on our website.

• If we are unable to approve your EIDL application, any Advance loan funds you receive will not have to be repaid.
• If we approve your EIDL loan request, any Advance funds you received will be deducted from the loan amount and considered a duplication of benefits, and therefore not have to be repaid.

During the application process on the website, you will be asked to also enter your bank information, Bank account, and Routing number.  The $10,000.00 grant should be directly deposited in your bank account three days after your application has been assigned to a loan officer. (Important to note, there is no guarantee to get $10,000.00; it is up to $10,000.00 but the amount will be determined by the loan officer once assigned)

Check the latest video training here  within your COVID-19 Tax & Accounting Resources

(see the website to apply here)

Some important points below from the bill (resources here)

• During the covered period, an entity included for eligibility in subsection (b), including small business concerns, private nonprofit organizations, and small agricultural cooperatives, that applies for a loan under section 7(b)(2) of the Small Business Act (15 U.S.C. 636(b)(2)) in response to COVID–19 may request that the Administrator provide an advance that is, subject to paragraph (3), in the amount requested by such applicant to such applicant within 3 days after the Administrator receives an application from such applicant.
• —Before disbursing amounts under this subsection, the Administrator shall verify that the applicant is an eligible entity by accepting a self-certification from the applicant under penalty of perjury pursuant to section 1746 of title 28 United States Code.
• —The amount of an advance provided under this subsection shall be not more than $10,000.
• USE OF FUNDS.—An advance provided under this subsection may be used to address any allowable purpose for a loan made under section 7(b)(2) of the Small Business Act (15 U.S.C. 636(b)(2)), including—

(A) providing paid sick leave to employees unable to work due to the direct effect of the COVID–19;

(B) maintaining payroll to retain employees during business disruptions or substantial slowdowns;

(C) meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;

(D) making rent or mortgage payments; and

(E) repaying obligations that cannot be met due to revenue losses.

• —An applicant shall not be required to repay any amounts of an advance provided under this subsection, even if subsequently denied a loan under section 7(b)(2) of the Small Business Act (15 U.S.C. 636(b)(2)).
• UNEMPLOYMENT GRANT.—If an applicant that receives an advance under this subsection transfers into, or is approved for, the loan program under section 7(a) of the Small Business Act (15 U.S.C. 636(a)), the advance amount shall be reduced from the loan forgiveness amount for a loan for payroll costs made under such section 7(a).
• AUTHORIZATION OF APPROPRIATIONS.—There is authorized to be appropriated to the Administration $10,000,000,000 to carry out this subsection.
• —The authority to carry out grants under this subsection shall terminate on December 31, 2020.

 

What are the bigger differences between 7(a) PPP and 7(b) EIDL loans?

It appears that you can apply for a 7(a) and a 7(b) however you cannot use the 7(b) for the same purposes as the 7(a).

7(a) = Forgivable Loan for Payroll, Rent, Utilities, Mortgage Interest

“Requires eligible borrowers to make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; they will use the funds to retain workers and maintain payroll, lease, and utility payments; and are not receiving duplicative funds for the same uses from another SBA program.”

7(b) = Any other working capital costs + Emergency 10k Grant (none of this loan can be used for business growth)

Reminder, if you use the 10,000 Emergency Grant for payroll, it will be reduced from the Forgivable Loan if they get 7(a) accepted.

Additionally, if someone has a 7(b) and it has been used for Payroll, it can be refinanced under 7(a) and forgiven.

The CARES Act (resource link here)

-SEC. 1110. EMERGENCY EIDL GRANTS. (E)

-SEC. 1102. PAYCHECK PROTECTION PROGRAM. (Q)

Additional resources here

Can you apply for both 7(b) and 7(a)?

Yes. See this section here as well.

• You can apply for both loans, but the “economic injury” component cannot be the same for both loans. You can’t say you need the loan for $100,000 in payroll relief for loan one and then say you need payroll relief for the same $100,000 payroll in loan two.
• You can also roll the 7(b) EIDL loan into the 7(a)loan.

When can you apply for the 7(a) PPP loan?

Eligible small businesses can get a loan to cover costs incurred between February 15, 2020, and June 30, 2020. This window of time is referred to in other areas of the law as the “covered” period.

Refer to our Cares Act FAQs for more information on the 7a PPP Loans here

For a spreadsheet comparison between 7a and 7b click here

If a business owner qualifies for unemployment…will that halt their ability to apply for any disaster relief? (Question asked by Ivette S Allen from our FB group)

No, they qualify to apply for both 7(a) and 7(b).  Refer to the section in our CARES ACT FAQ about the unemployment assistance as well (see here)

If you have a client that is classified as S-Corp for 2020, but it was Schedule C in 2019, how to apply?

They should apply using the forms corresponding to their current IRS classification status, if they have already been accepted as S-Corp for 2020.

Now, if you later end up amending previous years of taxes then you would do under the previous classification, Schedule C.

If the payroll credits are passed into law, will they apply to 2019 taxes or 2020’s taxes? My restaurant client already filed his 2019 taxes w/1 amendment. Would he be looking about another amendment for 2019?                                                                                  

Payroll Tax Credits will be applicable from the day the bill is approved and for up to two years up to December 31st 2022.

It would not apply to go towards payroll liabilities from previous years. However, if businesses reported losses in 2018 and 2019, they can amend their taxes to obtain cash

Is the SBA part of the Income Verification Express Service (IVES) meaning that, when we submit the 4506-T, the SBA office is actually receiving it directly from the IRS (instead of being sent to the taxpayer

When submitting the 4506-T as part of the SBA application, the IRS will send the transcripts directly to the SBA, not the taxpayer.

2019 Extension for Taxes and Payments

The 2019 income tax filing and payment deadlines for all taxpayers who file and pay their Federal income taxes on April 15, 2020, are automatically extended until July 15, 2020. This relief applies to all individual returns, trusts, and corporations. This relief is automatic, taxpayers do not need to file any additional forms or call the IRS to qualify.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020. Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15.

Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.

Check the IRS resources here

If we owe money to the IRS (not on payment plan currently) could that affect the qualification for benefits in the CARES ACT or the EIDL?

Money owed to the IRS regardless of payment plan is not an automatic disqualifier as long as it is not already a judgement. Judgements are automatic disqualifiers.

For those companies that had already applied, having to apply again in order to request the $10,000.00 will that Duplicate the application?

No. Once you apply again, your latest application will merge with the first via the EIN and SS# used to file the first application.

Businesses with 1099 subcontractors, should the business apply  for 7A and 7b and the 1099-misc contractors apply too?

Yes, they can both apply.

The Business owner would apply for their own expenses running the business, rent, utilities, any employees under payroll including their own payment as owners.

 

And their subcontractors can apply as sole proprietors (independent contractors) as well. The fact that they don’t have an entity created does not mean they don’t have expenses running their own business as an independent contractor.

So 7a and 7b is good for both.

Business has been in operation for a few years, but the current owner just bought it 7 months ago. Should that matter?

No. As long as the new owner maintains the business as it was purchased and has the proper documentation to provide if needed, there shouldn’t be a problem.

Is a 501c3 school qualified to apply

Yes – they are eligible and will be requested to submit the same forms required for Non Profits as per phone call and other resources. (see resources here)

Can a client with criminal records be able to apply for these loans?                  

Current SBA regulations have three questions on the application which will ask if any majority owner is currently incarcerated, facing charges, or on probation, which will render them ineligible. Therefore, they will not be able to apply.

The other two questions ask regarding any arrests in the last 6 months, and then any other arrests (in the last 6 months, or more) not including vehicular offenses.

If you answer yes to any of these, you will be asked to submit a form SBA 912, statement of personal history, so in this case, you can apply but you are still subject to final underwriting process including credit worthiness

Click here for the Form 912

The SBA also offers a DEBT RELIEF for existing loans

For those businesses with existing SBA Loans, the SBA might offer an additional SBA Debt Relief

• The SBA will also pay the principal and interest of new 7(a) Loans issued prior to September 27th, 2020
• The SBA will pay the principal and interest of current 7(a) loans for a period of six months

(see resources here)

Can I apply for both Loans? If I get an EIDL and/or an Emergency Economic Injury Grant, can I get a PPP loan?

Whether you’ve already received an EIDL unrelated to COVID-19 or you receive a COVID19 related EIDL and/or Emergency Grant between January 31, 2020 and June 30, 2020, you may also apply for a PPP loan. If you ultimately receive a PPP loan or refinance an EIDL into a PPP loan, any advance amount received under the Emergency Economic Injury Grant Program would be subtracted from the amount forgiven in the PPP. However, you cannot use your EIDL for the same purpose as your PPP loan. For example, if you use your EIDL to cover payroll for certain workers in April, you cannot use PPP for payroll for those same workers in April, although you could use it for payroll in March or for different workers in April.

Resources here and here

What is the “Express Bridge Loan Pilot Program” and how does it fit into the existing programs?

This mainly depends on the client’s situation, financials, and short and long term needs.

This program is also ran by SBA Lenders (banks and other third parties) and grants up to $25,000.00.

This pilot program allows SBA Express Lenders the authority to deliver expedited SBA-guaranteed financing on an emergency basis for disaster-related purposes to eligible small businesses, while the small businesses apply and wait for long-term financing.

https://www.sba.gov/sites/default/files/2020-03/Express-Bridge-Loan-Pilot-Program-Guide-FINAL-3.25.20.pdf

Important to note: Each state is also rolling out their own Emergency Bridge programs with individual rules and regulations per state. See the one corresponding to Florida as an example. https://floridadisasterloan.org

Are franchises eligible to apply for the 7(b) EIDL loan?

In short, yes. All applicants cannot exceed the size standards set in place by the SBA which in most cases means that the business has less than 500 employees per physical locations. In some cases of businesses with more than 500, the SBA  has different standards for depending on the type of business. You can always confirm if your business qualifies by visiting the official sba.gov Size Standards tool which allows you to input the 6 digit NAICS code and other information about the applicant to confirm if they are eligible based on number of employees or in some cases, annual revenue.

What does the following mean – UNEMPLOYMENT GRANT: If an applicant that receives an advance under this subsection transfers into, or is approved for, the loan program under section 7(a) of the Small Business Act (15 U.S.C. 636(a)), the advance amount shall be reduced from the loan forgiveness amount for a loan for payroll costs made under such section 7(a).

This means that if you apply for the 7(b) EIDL Loan, and receive the emergency cash advance of up to $10,000.00; and later do not qualify for the 7(b) EIDL loan, this advance will become a grant. Now, if you do apply for the 7(b), receive the up to $10,000.00 advance, and later apply for the 7(a) PPP loan and are also approved for and accept this loan, the 7(b) $10,000.00 grant will be considered part of the 7(a) loan. So if you were approved to receive $80,000.00 under the 7(a), and already received $10,000.00 under the 7(b), you will be disbursed a remaining amount of $70,000.00.

What are examples of collateral for the 7b EIDL?

The SBA will need  tangible collateral. Note that the SBA will not turn down a loan just because there is no collateral.

In addition to real estate they also consider collateral the following:

Personally-held, publicly-traded stocks, bonds, mutual funds, certificates of deposit and investment property not included in a retirement account may be pledged to meet SBA’s collateral requirements. 

Are non profit organizations 501c (6) eligible to apply?

No, 501c6 Non Profit are not eligible for the 7b or the 7a.

What should we do if a company does not have any shareholder that owns more than 20%?
SBA could not confirm 100% what to do in this situation, so they suggested the safest route which would be to list all owners until ownership percentage reaches 100% and wait until the loan officer is assigned to the loan to complete any other requirement as far as the personal guarantees and financial statements for the owners.  [resource, phone call with SBA rep #1608 on 04-06-2020]

What is COGS for the SBA? How do you determine it?

Cost of Goods Sold (COGS) Total expenditure for inventory items which customers buy. Cost of Goods Sold consists of the cost of purchasing the items, freight, manufacturing costs, modification costs, and packaging. For services, this is the cost of providing the services, including labor, material used, and transportation.

Not every company will have this account within their chart of accounts. It depends on how their chart of accounts is prepared and what type of business they have.

The SBA has this additional resource here to help businesses determine their COGS and understand their financial reports etc. This is not directly related to the EIDL or PPP but it is a resource they list on their website in order to help small businesses understand the financial reporting. See Resources here

Update about the way to submit applications through the SBA website

SBA confirmed, via direct email with our team on 04-07-2020; that all applications must be submitted using the new site created where the opportunity to select the emergency cash advance is also included. See the new SBA site here in order to submit the 7(b) EIDL application

They are still processing the form 5 application if it was already submitted; however, they are directing all applicants to fill out the new application as well.

Therefore, if you were in the first group of applicants that either created a User ID and Password, or uploaded the forms via Box. link, or sent by certified mail, fax or email, you still need to go to the SBA site and complete this application here as well.

All new applicants need to fill out the current streamline application only.

As a result of the CARES Act signed into law by the President on March 27^th, eligible small businesses in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan Advance Loans of up to $10,000.  This advance is in addition to the traditional Economic Injury Disaster Loan and requires you to complete a short application available on our website.

• If we are unable to approve your EIDL application, any Advance loan funds you receive will not have to be repaid.
• If we approve your EIDL loan request, any Advance funds you received will be deducted from the loan amount and considered a duplication of benefits, and therefore not have to be repaid.

To apply for a COVID-19 Economic Injury (EIDL) Advance Disaster Loan, please visit, https://covid19relief.sba.gov/#/

 

Do I need to provide a personal guarantee on EIDL Loan?

No. The SBA waived any personal guarantee on advances and loans below $200,000.00

For Loans Amounts over $200,000.00 the SBA may require personal guarantees.

Collateral is still used for loans over $25,000.00 if available although it is not a determining factor.

(see official resources here)