6 things to do now to prepare for an SBA loan

SBA loan money

RELATED CONTENT – Webinar on Demand: Small Business Administration COVID-19 Disaster & Relief Fund Update

DOWNLOAD: U.S. Chamber of Commerce Coronavirus Emergency Loans Small Business Guide and Checklist

CEOs are making tough decisions that will change the trajectory of their businesses, their employees and their communities.

Unfortunately, some of those decisions, including those about how they manage employees in this time, are dependent on cash flow and the resources that will be available from the Small Business Administration (SBA).

Whether you are applying for an SBA 7a relief loan through a lender or an SBA disaster loan through the SBA directly, Elijiah Gray, Partner at B2B CFO, advises that there are things you can do in advance of deciding which loan is best for you.

“Current legislation says that you cannot obtain funds through both programs, it is one or the other. That said, don’t let that stop you from taking action now,” says Gray.

As all U.S. states have now issued a disaster declaration, Gray advises eligible businesses (less than 500 employees) to apply for an SBA disaster relief loan now; you can decide which program is better once the bill is passed and before you take any funds.

Timing is a big factor in deciding which program is best for your business.

“In the past – with Hurricane Katrina and Hurricane Sandy – the SBA could not get the funds out for 5 months,” says Gray. “If you need money quickly, wait for the package that is waiting to be passed.”

Here are six things you can do today in preparation for applying for an SBA relief loan:

1. Compile 3 years of business tax returns.

2. Compile 3 years of all owner’s tax returns. Owners are defined as those with 20% or more of the company.

3. Get your 2019 tax return done; If you can’t complete it, make sure you have 2019 year-end financial statements in order.

4. Fill out a personal financial statement and keep it updated (as of 2/29/20 and update for 3/31/20 as soon as you can).

5. Fill out a debt schedule for your business.

6. Calculate your monthly operating expenses for the last 12 months (March 2019 – February 2020); Make sure the following three items are broken out: salaries, insurance, rent expense.

Completing these six items in advance will accelerate the process when you apply for assistance from the SBA.

How do I choose which loan is right for me?

Gray notes the pros and cons of both types of loans on a high level – once the bill is passed, more details regarding the 7a relief loan will be available to help guide your decision.

SBA disaster funds: available now

  • Pros: Terms – More attractive terms including low interest rates; (3.75%) and up to 30 year term
  • Cons: Time – Disaster loans have historically taken 4 – 5 months to get the funds since the loan comes from the government and not a bank. Available funds – maximum loan amount is $2 million.

SBA 7a relief loans: part of The Cares Act bill

  • Pros: Time – Funds come from banks that are qualified lenders, which can be processed quicker. Insiders say the 7a relief loans may have less stringent requirements than a traditional 7a loan. Available funds – proposed maximum amount is $10 million.
  • Cons: Terms – Higher interest rates: Prime + 2.75% floating with prime (3.25+2.75=6%)

Things are changing daily. Once The Cares Act Bill has passed, which includes SBA 7a relief loans, there will be more clarity on the terms it offers to small businesses. In the meantime, prepare the above 6 items so that your application process runs as quickly as possible.

Category: Financials

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About the Author: Anne Petrik

As Vice President of Research for Vistage, Anne Petrik is instrumental in the creation of original thought leadership designed to inform the decision-making of CEOs of small and midsize businesses. These perspectives — shared through repo

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  1. Regarding the SBA EIDL program, my local Chamber of Commerce newsletter said; “….businesses with credit available elsewhere are not eligible.”

    Do you have any insight to that statement? True? Not true? They could be mistaken.


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