Recently the SBA started releasing information about how to get relief funds for the effects of the COVID-19 virus. The rules for obtaining funds are very fluid. What is a fact this afternoon may have changed by tomorrow morning.
With that in mind, here are some resources that can help you as a real estate investor get up to speed about what SBA releif options are available.
Below is a link to an interview with Angela Venti who represents an accounting firm named Alloy Silverstein as a business developer. Ms. Venti has a background in banking and business development. She is interviewed by a representative of Bigger Pockets, a network of real estate investors . The questions posed are coming from someone who cares about a real estate investor’s current issues.
Here are the cliff notes with online references about the Economic Injury Disaster Loan for Coronavirus.
What is the Economic Injury Disaster Loan?
- * It’s a low interest fixed-rate loan providing up to
2 million dollars($15,000) for small businesses to assist in an economic disaster.
- * The $15,000 is in addition to the $10,000 advance.
- * Previous offers of over $15,000 will be honored.
- * Borrowers have 21 days to accept the loan.
- * Small Business Development Corporation (Michigan)
Why should I apply for an EIDL?
- The system runs on a first come first served basis so if you might need it, apply for it. The applicant can always turn down the funds even if they accepted the $10k advance.
What documentation will I need to apply?
I was told by my contact at the SBA that these documents will be needed at some point after the application process, HOWEVER, they are not needed for the application process. 04/10/20
- Tax Information Authorization (IRS Form 4506T) for the applicant, principals and affiliates.
- Complete copies of the most recent Federal Income Tax Return.
- Schedule of Liabilities (SBA Form 2202).
- Personal Financial Statement (SBA Form 413).
- Profit and loss statements
- Monthly sales figures (SBA Form 1368)
Is there a paper application form?
- Yes but you have to go to https://disasterloan.sba.gov/ela/Information/PaperForms to get it.
If you applied for an EIDL before March 31st you should reapply BECAUSE:
- You were previously denied.
- You may now be eligible for the $10,000 advance .
- The new application format doesn’t require supporting documentation and the process has been revised for ease and a reduction in frustration.
What types of businesses are eligible?
- Businesses with less than 500 employees .
- Tribal businesses with less than 500 employees .
- Sole proprietors.
- Independent contractors.
- Most private non profits.
What location must my business be in to qualify for an EIDL?
- “Small business owners in all U.S. states and territories are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19).”
How do I apply for an EIDL?
- Apply directly to the “SBA’s disaster assistance program.”
- Do not apply to a bank.
- Under NO circumstances pay anyone promising to expedite your application.
Is there a fee for application for an EIDL?
- No. If anyone requests payment for application for an EIDL it’s a scam.
What can my business use the EIDL funds for?
- Fixed Debts.
- Accounts Payable
- Other bills not payable because of disaster
What is the interest rate?
- Small businesses 3.75%
- Nonprofits 2.75%
How long do I have to pay the EIDL loan off?
- Up 30 years.
What other terms are there for the EIDL?
- Loans under $25,000 can be unsecured.
- The amount over $25,000 that requires securing the loan is disputed at the time of this writing
- The first payment is due 12 months after funds are issued.
- Terms are determined on a case by case basis .
- The loan applicant does not have to be turned down for credit elsewhere.
- Having insurance will not be a barrier to receiving an EIDL.
Is the EIDL a forgivable loan?
What is the approximate turnaround time? https://wedc.org/wp-content/uploads/2020/03/EIDL-Frequently-Asked-Questions-final-3-20-20.pdf
Review time is approximately five days. Receipt of funds occurs about 3 weeks after approval.
- The above were technically true but the SBA is so overwhelmed by the response to the new programs initiated by the CARES act that they are unable to cope. Despite their best efforts, getting the wheels in motion has been an overwhelming task for SBA personnel. The timelines are up in the air right now (04/09/20)
The Federal Reserve funds rate is close to to zero. Why is the interest rate 3.75%?
- The interest rate was set by congress.
Is the applicant required to take the funds?
Tips for applying: https://sbdcmichigan.org/disaster-loan-help/
- Include COVID-19 or Coronavirus as the disaster you are applying for relief from .
- If the business is new and has little or no track record include a business plan, the amount of owner investment and projected sales.
- Explain if the business is seasonal.
- If the business owner has more than one business submit one application per county.
- Carefully fill out the application. Missing information is the biggest reason for delays.
- Use the business name and exact name of all owners on on federal tax returns.
- If your tax returns reference other businesses you own submit returns for those businesses also.
- If you need more funds you can submit supplemental documentation and ask for more. If you need less, request less.