Small Business Administration 7(a) better known as the SBA Loan is an amazing tool to finance your business. Because they’re guaranteed by the federal agency, this allows lenders to provide lower interest rates and more flexibility with terms. Especially during these difficult times this loan can help grow or maintain your business without bringing on additional heavy debt. With all the benefits the SBA loan brings, it can be an extremely difficult loan to qualify for. Even still, this program is currently the best way to secure the future of your company once this tough time is over.
WHAT IS AN SBA LOAN?
Small Business Administration 7(a) are loans guaranteed by the SBA provided by lenders who are mostly banks. This loan can provide assistance and eligible recipients may qualify for a loan up to $10 million dollars, which is determined by 8 weeks prior average payroll plus an additional 25% of that amount. This is double the amount of the original SBA Loan. Additionally these payments will be deferred for up to six months.
HOW TO APPLY FOR AN SBA LOAN
Typically applying for an SBA loan can take weeks or even months. With the current crisis at hand there is a much faster turnaround time. It’s easy to apply for the SBA loan by visiting sba.gov, certain requirements may weigh heavy on your application. One of the main upper hands is to make sure that your personal and business finances are in the best shape possible. We can help you every step of the way and make sure your application is the most accurate representation of your company and how your company is presently affected.
Typical issues your Business may be encountering:
- Supply Chain, Inventory, Production issues
- Workers and working capabilities
- Capital Access
- Facility Cleaning In-capabilities due to increase of costs
- Business insurance lack of coverage
- Decrease in demand
- Inability to fund marketing campaigns to communicate effectively with customers
- Change in original planning for the year
BENEFITS OF THE SBA LOAN
This loan will ensure that all or most of the expenses your business incurs are covered during the window of the unforeseeable future. This will include payroll support for your employees, including paid sick leave, medical leave, and family leave. As well as the costs typically related to the continuation of health insurance during those leaves. As well as maintaining employee salaries, mortgage payments, rent, utilities as well as any other expenses that your business incurred before the covered period. This all goes to ensuring that when this is over, your business as well as your staff aren’t more affected then they already are.
DOES YOUR BUSINESS QUALIFY FOR THE SBA LOAN
- A small business with fewer than 500 employees
- A small business that otherwise meets the SBA’s size standards
- A 501(c)(3) with fewer than 500 employees
- An individual who operates as a sole proprietor
- An individual who operates as an independent contractor
- An individual who is self-employed who regularly carries on any trade or business
- A Tribal business concern that meets the SBA size standard
- A 501(c)(19) Veterans Organization that meets the SBA size standard In addition, some special rules may make you eligible:
- If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
- If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply
REMEMBER: The 500-employee threshold includes all employees: full-time, part-time, and any other status.
You won’t qualify if your business is involved in any of the following:
- Engaging in any illegal activity
- Owe more than 50% or are more than 60 days late on court ordered child support
- If your business is agricultural (farming) , aquaculture enterprise, agricultural cooperative or a nursery.
- If your business presents productions that are sexual in nature or derives directly or indirectly more than de minimis gross revenue through the sale of products or services or the presentation of any depictions or displays of prurient sexual nature.
- If you obtain more than one third of your gross annual revenue from legal gambling.
- If you are not in the business of lobbying.
- You cannot be a state, local, or municipal government entity and cannot be a member of congress.
Do I have any other options besides an SBA Loan??
Of course, it’s just the safest and most efficient tool out there presently to businesses who may not have any ideas where to begin to seek help. But you have other options, you can always scout out additional lenders not listed through the SBA. If you’re simply trying to take care of your employees during this time. They will soon release the paycheck protection program, it may not cover the rent but it will allow you to maintain paying your employees and their health insurance so nobody goes without coverage during this time when they may need it most.
PAYCHECK PROTECTION PROGRAM
The administration has yet to release the list of lenders who will be offering loans under this program. But these have released the guide lines in order to help you be prepared for applying when that time comes.
When lenders are evaluating eligibility, they’re advised to consider if
the business was in operation before February 15, 2020 and had
employees that they paid as well as payroll taxes.
Lenders will also ask you for a good faith certification that:
1. The uncertainty of current economic conditions makes the loan request necessary in order to support the company’s ongoing operations. 2. How the borrower may use the loan to maintain workers as well as payroll and or lease, mortgage and utilities. 3. If the borrow has or does not have a pending application for a loan that is similar to the current loan they’re applying for. 4. Prior to February 15th, 2020 to December 31st 2020, if the borrower has not received a duplicate loan for the purpose and the amounts applied. If the applicant is a sole proprietor, self employed individual, or an independent contractor. Lenders may need the following as well as additional announced documents, such as payroll tax filings, 1099-MISC as well as income and expense from the sole proprietorship.
WHAT LENDERS WILL NOT LOOK FOR
- If the borrower was unable to obtain credit elsewhere.
- Personal guarantee is not required for the loan application.
- No collateral is required for the loan.
HOW MUCH CAN YOU BORROW?
Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.
FOR EMPLOYERS:
the total of payments of any compensation that is as follows:
• salary, wage, commission, or similar compensation;
• payment of cash tip or equivalent;
• payment for vacation, parental, family, medical, or sick leave
• allowance for dismissal or separation
• payment required for the provisions of group health care benefits, including insurance premiums
• payment of any retirement benefit
• payment of state or local tax assessed on the compensation of the employee
FOR SOLE PROPRIETORS, SELF-EMPLOYED INDIVIDUALS or INDEPENDENT CONTRACTORS:
The total of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.
WHAT’S EXCLUDED?
- Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
- Payroll taxes, railroad retirement taxes, and income taxes
- Any compensation of an employee whose principal place of residence is outside of the United States
- Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116–5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act
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