How to Apply for SBA Loans Due to COVID-19

Refreshed for January 2021

It’s no secret that the recent COVID-19 outbreak has disrupted our daily lives—and more than 30 million of America’s small businesses. From one small business owner to another, I’m right there with you. It’s an incredibly challenging time, and it’s scary at times.

But in the midst of our troubles, there is good news.

The Government is Offering Refreshed SBA Disaster and PPP Loans

The United States Small Business Administration (SBA) is offering low-interest loans of up to $2 million to small businesses and nonprofits who are severely impacted by the coronavirus. You can use the loan to pay for:

• Fixed debts
• Payroll
• Accounts payable
• Other bills that need to be paid

These small business loans are available across all 50 states in the United States, and in American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. The SBA is working quickly and directly with your state or territory’s Governor to make these loans available as soon as possible in your area.

Additionally, the government recently passed a new stimulus bill that refreshes the Paycheck Protection Program (PPP) loans. A number of changes have been made to help make these loans work better for small business owners, including:

• More flexibility on what the money can be used for (payroll, property damage from civil unrest, and more)
• One-page loan forgiveness applications for PPP loans up to $150K
• The ability to apply for a second PPP loan, or ask for more money from your first PPP loans
• More stringent definitions of what makes a small business (to prevent larger companies from accessing funding)
• And More

If you're interested in applying for a PPP loan, keep in mind some lenders may require you to take out a business insurance policy to protect collateral (more on this at the end of the article).

How the New Small Business Loan Works

The rates on these loans are low—just 3.75% for small businesses and 2.75% for nonprofits. The repayment terms vary from applicant to applicant and are based on your ability to pay the loan back. All small business owners have up to 30 years to pay their loans in full.

Steps to apply for an SBA loan online:

Step One: Decide who will apply for the loan.

As the owner of your business, make sure you’re the one to fill out the application form. If you can’t complete it yourself, choose someone with legal authority to sign on your behalf.

Step Two: Gather the information you'll need for your SBA loan.

Gather all supporting documentation ahead of time. It’ll help you move through the process more quickly. In addition to your application, you’ll need:

• A signed Tax Information Authorization form ( IRS Form 4506T ).
• Copies of your recent federal tax returns or an explanation if you don’t have them available.
• A personal financial statement that’s completed and signed ( SBA Form 413 ).
• A list of all of your business’s fixed debts ( SBA Form 2202 ).

Step Three: Download the loan application.

Go to the SBA’s web site to download an application form .

Step Four: Specify why you need the business loan.

Begin the application form. When asked why you need assistance, choose “Economic Injury (EIDL).”

Step Five: Upload your SBA loan application to apply.

Upload your finished forms online. You can also mail them directly to the U.S. Small Business Administration:U.S. Small Business AdministrationProcessing and Disbursement Center14925 Kingsport Rd.Ft. Worth, TX 76155-2243

Expert tip: Give yourself plenty of time to complete the paperwork. Chances are, many small business owners will be applying for loans all at once. This could cause the website to slow down or even crash. Try to stay patient along the way.

The SBA is working hard and fast to get money to your door, but it could take time given the number of businesses in need. Fortunately, it’s easy to check the status of your loan application by calling 1-800-659-2955 (TTY/TDD: 1-800-877-8339) or by emailing [email protected].

Have Collateral and Business Insurance For Loans $20,000+

If you’re applying for this business loan that’s more than $20,000 to $25,000, your lender could ask you for collateral. This might be your business’s property or another asset that a lender accepts as security for your loan. Your lender might also ask you to have business insurance that protects that collateral. But don’t worry; it’s important to know your SBA loan won’t get rejected if you don’t have collateral.

If you don’t have business insurance, now’s the time to get a plan. You’ll want to consider getting:

• General commercial liability insurance: This type of policy can cover costs from third-party accidents, property damage, and bodily injury. For example, if a customer visits your location, gets injured, and sues you, this coverage could cover some or all of the resulting costs.
• Professional liability insurance: This policy can cover you if someone accuses you of negligence in your work. For example, let’s say you’re a financial advisor who gives advice, but your client loses money based on that advice. If your client gets angry and sues, this coverage could help pay for legal representation and other costs.

One thing is certain, the coronavirus shut-down has made me realize how anything can happen quickly. It’s incredibly important to protect your business ahead of time. If you don’t have business insurance now, you should investigate getting a plan as soon as possible. Check out Simply Business’s online quote tool to investigate policy costs in just 10 minutes or less.

Stay Positive, Stay Hopeful

My hope is that the SBA will be able to send out checks as soon as possible to all small business owners in need. This is a time when, more than ever, you need cash to keep going. Hang in there and remember how resilient you are. After all, owning a small business isn’t for the faint of heart; it took strength and determination to get started. You already have the mindset to push forward, even now.

America needs you. Small businesses keep our economy going by employing Americans, and helping our communities thrive and innovate. The coronavirus is devastating, but it’s not the end of the story. As a small business owner, you have the grit to survive. I believe in you.