Insights

5 Tips for Maximizing SBA Disaster Assistance

How to make the most of government loan programs offering relief for small businesses impacted by COVID-19

By Megan Ryan | March 25, 2020

Small business owner with help sign

The spread of COVID-19 is staggering American small businesses. The U.S. could lose five million jobs due to the virus, The Wall Street Journal reports.

In response, the federal government has activated federal disaster loans through the U.S. Small Business Administration (SBA).

All states have now been declared eligible for Economic Injury Disaster Loan assistance.

The program, which operates independently of banks, offers up to $2 million in assistance per small business to be repaid over a maximum of 30 years.

The application process can be cumbersome and difficult, said Cashin White, director of SBA Lending at BOK Financial. Here are White’s five tips for business owners considering applying for assistance.

1. Don’t wait.

Businesses across the U.S. are eligible to apply, and White expects the online application to be flooded for some time. “The online application process likely won’t be perfect,” White said. “I have heard about a variety of website issues as the site is continually being inundated with applicants, but I highly encourage eligible businesses to apply as soon as possible since it is first come, first served.”

2. Who can apply?

The program is aimed at businesses with less than 500 employees. The most relevant factor is if your company has been directly impacted by the pandemic. Applicants should be aware that accepting funding through one federal loan program may preclude you from applying for another, White warns. However, just applying does not disqualify you.

“I encourage people to stop guessing if they qualify and just apply,” White said. “It would be much better to go through the application process and be offered the loan in 30 days and to decide you don’t need it, than to wait until May to apply and have the funds run out.”

3. Save your work.

White recommends applicants take care to complete every step in the application process and submit all required documentation to avoid slowing the process. Applicants should choose a memorable password and save their progress along the way to avoid having to backtrack if anything should happen with the website.

4. Consider your options.

Business owners with access to other financing options, such as personal liquidity or traditional bank financing, should consider those first. “Some owners may be in a position to personally contribute to keep their businesses afloat. The SBA will likely approve loans for businesses that have seen a dramatic decline in revenue due to the pandemic and have little access to credit elsewhere,” White said.

You should also be aware that SBA requires personal guarantees and will look to take personal assets as collateral if they are available, White said.

5. Know what it covers.

Funds are meant to be used for fixed costs such as rent, payroll, fixed debt and accounts payable, among others. Initial loan payments may be deferred up to 12 months. The disaster loans are not intended to be used for buying a building, purchasing a business or saving for later, White said.

White encourages business owners to talk to their existing banker about traditional financing options while simultaneously exploring SBA loan programs and options available through other resources. In addition to the SBA website, local resources include Small Business Development Center or a regional SBA office for assistance.

Additionally, review options through your chamber of commerce and office of economic development for locally based financing and grant opportunities.

“Borrowers need to be prepared that if they apply today, it might be a month or longer until the funds are in their account. They have to find a way to survive April,” White said.