One of the many challenges businesses face is adapting to an ever-changing world. We can almost never predict what these changes may be. We do know that each one will greatly impact the way business owners, well, do business. 

The current challenge: the novel coronavirus. Social distancing orders and, in some states, mandatory business closures means our small business community is struggling. The situation has left many of the freelancers, startups, and small businesses we serve fighting to stay afloat.

The federal government is stepping up to help small businesses in a big way. On March 17th, the Small Business Administration (SBA) expanded their Economic Injury Disaster Loan program to offer loans to small businesses in all 50 states and territories facing financial challenges from the coronavirus.  

More recently on March 27th, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, into law, which includes $349 billion for the Paycheck Protection Program, a small business relief program that gives business owners forgivable loans to keep their workers employed. 

If your business has been affected by the COVID-19 pandemic, the SBA PPP loan could give you access to 2.5X your average monthly payroll in relief funds.

NorthOne can help your business get faster access to these funds through our partner, Radius Bank.

Additionally, many large businesses and organizations are rising to the occasion and offering discounted or free resources to business owners.

What is an SBA Loan?

The U.S. Small Business Administration is an agency that helps small businesses get funding to grow, expand, and recover from hard times. The SBA is not a lender itself, but partners with select banks and credit unions to issue guaranteed business loans to approved small business owners. Working with an approved lender, small business owners can get the money they need to pay their bills and their staff with low interest rates and long-term repayment plans to help their business survive the pandemic.

Reasons Why Your Small Business May Need an SBA Loan

With non-essential businesses being forced to close as a precautionary response to the coronavirus, the reasons businesses need an SBA loan are related to capital access, revenue loss, and employee support.

Capital Access: Social distancing has caused an immediate loss in revenue for small businesses that rely on foot traffic to thrive. Businesses need access to cash to pay employees or purchase inventory. 

Failing to Meet Customer Goals: Businesses are being forced to cut staff, which is reducing their ability to meet clients’ needs. 

Supply and Demand Shortcomings: As suppliers also close their doors during the pandemic, it’s difficult to secure resources needed to deliver a product or service.

Facility Maintenance Costs: Some owners can’t afford to pay rent or the mortgage for their business. The pandemic has created an emphasis on sanitation, and some small businesses cannot afford in-depth sanitization services needed to protect their employees and customers. 

Changing Market: The pandemic is creating an economic crisis as it forces businesses to close up shop — some permanently. 

Small Business Marketing: Between less foot-traffic and government-mandated social distancing, loyal customers don’t know that some small businesses are still open. For example, many restaurants are still offering takeout and delivery. These businesses need a budget to support marketing efforts for these customers.  

The Economic Injury Disaster Loan Program and Coronavirus

The Economic Injury Disaster Loan is an SBA disaster loan available to small businesses. Originally, the SBA offered low-interest federal loans to businesses impacted by natural disasters like floods or tornados. The disaster loan helped cover some physical damage and support the business financially while the storefront was being repaired. 

Since the coronavirus is affecting businesses across the country, the SBA expanded these loans to support small businesses affected in all states and territories. The agency will provide capital loans up to $2 million to help overcome temporary loss of revenue with long-term repayment plans to keep payments affordable while businesses recover. 

7(a) Program

The 7(a) program offers up to a $5 million loan, which should provide support for working capital, expansions or renovations, purchase of land, new buildings, equipment, refinancing debt, inventory, and support lines of credit.

Express Loan

The Express loan offers up to $350,000 for up to a 7 year loan term. If approved, small businesses can choose to continue borrowing money as they pay it back. The loan can be used for the same expenses as a 7(a) loan.

Community Advantage

This loan is backed by mission-based lenders that want to promote economic development, ideally in under-served communities. Small businesses can receive up to $250,000 and the loan can be used for the same expenses as a 7(a) loan.

504 Loan

This loan has no maximum. It is used to support small businesses looking to support their workforce or create new jobs.

Microloan

Microloans are issued by designated nonprofit community-based organizations instead of traditional banks or credit unions. The average lending amount is $14,000, with a maximum loan amount of $50,000. This loan can be used for working capital, supplies, equipment, and fixtures. 

Export Express

This loan offers up to $500,000 and gives small businesses quick access to a large amount of capital to make up for lost sales caused by the pandemic.

Export Working Capital

This loan gives businesses advances for up to $5 million. This helps businesses complete any outstanding export orders needed to gain or keep overseas customers.

International Trade

This loan is directed at small businesses engaged in international trade. The loan can steady them as they adapt to changing business conditions, expand sales to new markets internationally, or bring back operations domestically. 

Who is Eligible for SBA Disaster Loans?

Currently, all small business owners in all U.S. states and territories are eligible to apply for an SBA disaster loan due to economic stress due to the coronavirus (Covid-19).

SBA Disaster Loan Requirements 

SBA loans are in high demand now with the mass of small businesses in need of financial relief. When you apply, it is important to supply as much in-depth information as possible. Use the loan application checklist for help when applying. 

Some requirements of an SBA loan application may include: 

  • SBA Form 1919: Completed borrower information form.
  • SBA Form 1920: Completed lender application. Use the SBA’s lender match tool to find the best lender for your loan prior to filling out this form. 
  • Statement of personal history: Include credit and loan history.
  • Financial statements: Cash flow projections will help identify any connection between the pandemic and revenue loss. For NorthOne customers, integrating your financial tools with our banking app can make gathering this information easier. 
  • Loan application history: Provide further detail about loan history.
  • Business lease
  • Proof of business: Include certificate and license.