SBA disaster loans

23,713 Views | 208 Replies | Last: 3 yr ago by itsyourboypookie
Husky Boy Jr.
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I have a couple clients who have started the process in applying for SBA disaster loans https://disasterloan.sba.gov/ela/Information/EIDLLoans to cover working capital and month to month payroll needs. Any insight on how these work, what to expect, timing, etc from anyone who has been down this road in the past or has info on the current situation?
LOYAL AG
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Go find Greg Martin on LinkedIn. He's a banker at BB&T now Truist in CS He posted a video on this last night that's very detailed.

By the way I've advised my clients to hold off on the Disaster Loan program. The loans that will come from the bill being passed today or tomorrow are expected to have a provision to forgive money spent specifically for payroll whereas Disaster money spent on payroll won't be forgiven and you can't submit payroll for both programs. I'm also betting that the underwriting for this bill will be very decentralized and happen much quicker than a Disaster loan which I've been told can take months.
Azariah
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We used a disaster loan from the SBA after Harvey, and I can confirm that the red tape is a nightmare. different bureaucrats enforcing rules in different ways make it a nightmare to navigate.

The amount and interest rate is good, however.
Hincemm
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disagree slightly. i think it's highly advisable to apply even if you don't plan to use...in your back pocket if you will.

HumbleAg04
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Did it after Harvey. Never took the full amount, paid it in full prior to 1st payment being due. Low rate, decent amount, ****ing ridiculous amount of red tape.

Would do again.
Spoon
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My banker and I decided to wait for the relief bill to be finalized. He thinks there will be much less red tape. We are an essential business though. I have about 2 months of working capital. My concern is my A/R getting out of shape because of office shutdowns.
flown-the-coop
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I still owe a call in to a helpful Ag from the B&I board, but from what I have gathered so far you may want to start the process by either working with your existing bank or seeking out a banking partner.

Agree that the forthcoming loans will be better than the regular disaster loans. Also, many banks will offer their own version of loans that do not have to go through the intense documentation, application and red tape process that have always kept my company away from the SBA.
AgGrad99
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Will the loans/grants, from the new bill be administered through the SBA?

(the one that forgives lease/payroll payments)
Spoon
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My banker thinks they will.
AgGrad99
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Thanks.

My fear would be applying for the wrong one. Their website isnt the easiest to navigate as is.
flown-the-coop
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You still have to go through the bank per my understanding. Intend to watch the reference video on LinkedIn later.

You do a simple application on SBA and it "matches" you with lenders. But that will likely link you to a national lender.

Better to talk to an existing banking relationship. They will have an SBA resource.
LOYAL AG
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Hincemm said:

disagree slightly. i think it's highly advisable to apply even if you don't plan to use...in your back pocket if you will.


Do you mean versus not taking debt at all? In that case I might agree. But the Disaster program is considerably worse than the CARES program will be. Take the better deal, that's what I'm telling my clients.
LOYAL AG
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Update:

I have a client that was on a concall with Bill Flores. He said that the way the draft is worded the SBA will have 15 days to get the details ironed out. Then once it goes live approvals would be required within 36 hours. HOURS, not days or weeks. At this point I can't see how the SBA can play any active role in underwriting as they just don't have the resources. It's going to have to go through the banks with a big rubber stamp. My advice to my clients:

  • Have details related to your non payroll expenses and be able to prove all of it.
  • Have details for payroll.
  • Have details of obligations you didn't meet because you ran out of money.
  • Have details of debt obligations you weren't able to meet. Mortgage, car payments, etc.
  • Remember if you're an S or C Corp you're on payroll so included yourself. if you're a Sole Prop, Partnership, etc. consult your lender as I don't really know how that would work.

Add all that up and be ready to go on Day 1.
Hincemm
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LOYAL AG said:

Hincemm said:

disagree slightly. i think it's highly advisable to apply even if you don't plan to use...in your back pocket if you will.


Do you mean versus not taking debt at all? In that case I might agree. But the Disaster program is considerably worse than the CARES program will be. Take the better deal, that's what I'm telling my clients.
for sure take the better deal. i hope it works out that way
Martin87
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Agree with the above. Wait for a few days to find out what comes out of Congress. 10 years ago, a little used SBA program called ARC allowed small businesses to borrow at zero rates for up to 5 years. 100% SBA guarantee for the bank and the SBA paid the bank 3% to do them. The drafts working in both sides are a moving target, but something like the above or better should be in the final bill in one form or another. That program had little to no red tape and we were getting customers approved within 48 hours.
AgGrad99
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LOYAL AG said:

My advice to my clients:

  • Have details related to your non payroll expenses and be able to prove all of it.
  • Have details for payroll.
  • Have details of obligations you didn't meet because you ran out of money.
  • Have details of debt obligations you weren't able to meet. Mortgage, car payments, etc.
  • Remember if you're an S or C Corp you're on payroll so included yourself. if you're a Sole Prop, Partnership, etc. consult your lender as I don't really know how that would work.

Add all that up and be ready to go on Day 1.
The amounts wont be much, yet, since this situation is 2 weeks old. But it will add up as we go. Curious how this will be handled if I'm to show what has happened, not what will happen over the next month+
Husky Boy Jr.
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Had another client contact me just now and request details of all liabilities. Thanks for all the input
Husky Boy Jr.
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And I tend to agree that a wait and see attitude at least to the end of the week is wise
rafjaf
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LOYAL AG said:

Update:

I have a client that was on a concall with Bill Flores. He said that the way the draft is worded the SBA will have 15 days to get the details ironed out. Then once it goes live approvals would be required within 36 hours. HOURS, not days or weeks. At this point I can't see how the SBA can play any active role in underwriting as they just don't have the resources. It's going to have to go through the banks with a big rubber stamp. My advice to my clients:

  • Have details related to your non payroll expenses and be able to prove all of it.
  • Have details for payroll.
  • Have details of obligations you didn't meet because you ran out of money.
  • Have details of debt obligations you weren't able to meet. Mortgage, car payments, etc.
  • Remember if you're an S or C Corp you're on payroll so included yourself. if you're a Sole Prop, Partnership, etc. consult your lender as I don't really know how that would work.

Add all that up and be ready to go on Day 1.

So you have to wait until you miss payments and actually run out, not pay staff, etc. to get approved?
Terence Kitchens
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I really need one of these. I own a fundraising company for schools, we provide the product like cookie dough, tumblers, etc..and we are completely shut down during our busy time. The money we make now usually carries us through the summer to get to the fall. Even if things get better in a couple of months, it will be September before we get business again.

Do I need to be talking with a banker here locally, or just wait until things are up on a website? If any of you can give me some advice I would greatly appreciate it.

-TK
STX Ag
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rafjaf said:

LOYAL AG said:

Update:

I have a client that was on a concall with Bill Flores. He said that the way the draft is worded the SBA will have 15 days to get the details ironed out. Then once it goes live approvals would be required within 36 hours. HOURS, not days or weeks. At this point I can't see how the SBA can play any active role in underwriting as they just don't have the resources. It's going to have to go through the banks with a big rubber stamp. My advice to my clients:

  • Have details related to your non payroll expenses and be able to prove all of it.
  • Have details for payroll.
  • Have details of obligations you didn't meet because you ran out of money.
  • Have details of debt obligations you weren't able to meet. Mortgage, car payments, etc.
  • Remember if you're an S or C Corp you're on payroll so included yourself. if you're a Sole Prop, Partnership, etc. consult your lender as I don't really know how that would work.

Add all that up and be ready to go on Day 1.

So you have to wait until you miss payments and actually run out, not pay staff, etc. to get approved?


This. If you're already missing obligations not even 2 weeks after SHTF, who is going to underwrite you?

Side note-I heard one talking head say to draw LOC now even if you don't need it, if you don't the banks may not let you a few weeks or months down the road. Anyone experiencing or hearing of any trouble drawing on a LOC? We have a considerable amount of cash on hand, and intend to keep operating as we are an essential business, so I hate to do it unnecessarily.
LOYAL AG
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rafjaf said:

LOYAL AG said:

Update:

I have a client that was on a concall with Bill Flores. He said that the way the draft is worded the SBA will have 15 days to get the details ironed out. Then once it goes live approvals would be required within 36 hours. HOURS, not days or weeks. At this point I can't see how the SBA can play any active role in underwriting as they just don't have the resources. It's going to have to go through the banks with a big rubber stamp. My advice to my clients:

  • Have details related to your non payroll expenses and be able to prove all of it.
  • Have details for payroll.
  • Have details of obligations you didn't meet because you ran out of money.
  • Have details of debt obligations you weren't able to meet. Mortgage, car payments, etc.
  • Remember if you're an S or C Corp you're on payroll so included yourself. if you're a Sole Prop, Partnership, etc. consult your lender as I don't really know how that would work.

Add all that up and be ready to go on Day 1.

So you have to wait until you miss payments and actually run out, not pay staff, etc. to get approved?
I don't think that's what's going to happen. Flores told the group to go back to March 1 to capture expenses even if they were paid just because it all changed in March. I think the point was that was activity would be accepted because maybe you paid rent on March 1 but then things stopped and you couldn't recoup that cost. My clients are going to be looking for several months of expenses but we'll start with March. That's how I interpreted that.
southtexasag
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This is the info that I have found on it:

The Differences between the SBA disaster Loan and the SBA Relief Loan

Economic Injury Disaster Loan (EIDL)
  • Apply through the SBA (click here)
  • Loan amount up to $2,000,000
  • 3.75% interest rate for For-Profit companies
  • 2.75% interest rate for Not-For-Profit companies
  • Loan term not to exceed 30 years
  • Only available in states with SBA approved declarations of disaster (As of 3/20/2020 Alabama, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Virginia, West Virginia, Washington, Wisconsin, Wyoming, and Utah) This is the most current data we could find and continues to evolve.
  • We understand there are currently over 25,000 applications submitted with at least 3-week approval times. As the number of applications grow, it is anticipated the approval times will be pushed out longer with funding coming several weeks after that.
  • If you receive the EIDL, you will not be eligible for the SBA 7(a) Relief Loan


SBA 7(a) Relief Loans (PROPOSED, NOT YET LAW, as of 3/24/2020)
  • Apply through Fountainhead (click here)
  • Loan amount up to $10,000,000
  • Single-digit interest rates (likely to be WSJ Prime + 2.75% - currently 6.00%) for SBA eligible borrowers and Not-For-Profit companies
  • Fully amortizing loan term of 10 years
  • Loan proceeds are only for payroll support including medical leave, costs related to health benefits, employee salaries, mortgage payments, rent, utilities, insurance, and any other debt payments incurred before 2/15/2020
  • Relief loans are not eligible for business acquisition, real estate purchase, or other typical 7(a) proceeds, but may be eligible for business debt refi's stay tuned
  • Borrower SBA Guarantee Fee will be waived
  • No prepayment penalties
  • We're anticipating an approval within a few days after the Keeping Workers Paid and Employed Act is passed, as long as all required documentation is submitted
  • If you receive the SBA 7(a) Relief Loan, you will not be eligible for the EIDL
AgGrad99
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Any info about the portions of the relief loan, that are supposed to be turned into grants?
southtexasag
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Not that I saw from Fountainhead, but I have heard thats a good possibility. I think I heard if you're still in business with all your employees in June then all or a portion turns into a grant.
AgGrad99
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Thanks for the info.

oldag00
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I really appreciate everyone's ideas here in this thread. Thank you.

southtexasag-
Did you create those bulleted lists outlining the differences? Or is it publicly available information I could find? I'd prefer not to begin my conversation with "A guy from TexAgs says"
AgGrad99
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If anyone finds info on the loan converting to a grant, please post.

southtexasag
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Ha, understandable. Those came from the Fountainhead website. They specialize in SBA lending. Their recommendation is to wait for the new program to come out once the house passes the bill.

here is the link to the info:

https://www.fountainheadcc.com/eidl-vs-7a-relief/
LOYAL AG
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So the bill that passed the Senate and is now in front of the House has quite a bit different that what I presented earlier this week. At a minimum it has about 780 more pages though not all of that is related to SBA lending. Today I read and digested the entire Payroll Protection Program which is Section 1102 if anyone cares to read it. Rather than post my recap here I'll provide a link to an Illinois CPA firm that has a nice concise write up on their website.

https://www.hsccpa.com/cares-act-passes-senate-tentative-sba-loan-program-changes/

Some highlights:
  • 12 Month look back at payroll costs. The average of those 12 months is important. Multiply that by 2.5 and there's your amount.
  • EE Benefits are included as are state taxes. SS/Medicare are not.
  • Includes employees and 1099 contractors.
  • $100K cap on who can be counted.
  • Maybe used for payroll related, interest expense (loan has to predate event), rent and utilities
  • Borrower will apply at bank, sign some certifications and be approved. Should fund very quickly.
  • Borrower must apply for forgiveness within EIGHT WEEKS of loan date. So if you get it on April 1 you have to apply for forgiveness before the end of May.
  • SBA will have 15 days to set up program before we see activity.

texrover91
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Assume TX qualifies for the EIDL now?
AgGrad99
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When this is over, I owe you a steak dinner.

Thanks for the summary.
Redassag94
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southtexasag said:

This is the info that I have found on it:

The Differences between the SBA disaster Loan and the SBA Relief Loan


Economic Injury Disaster Loan (EIDL)
  • Apply through the SBA (click here)
  • Loan amount up to $2,000,000
  • 3.75% interest rate for For-Profit companies
  • 2.75% interest rate for Not-For-Profit companies
  • Loan term not to exceed 30 years
  • Only available in states with SBA approved declarations of disaster (As of 3/20/2020 Alabama, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Virginia, West Virginia, Washington, Wisconsin, Wyoming, and Utah) This is the most current data we could find and continues to evolve.
  • We understand there are currently over 25,000 applications submitted with at least 3-week approval times. As the number of applications grow, it is anticipated the approval times will be pushed out longer with funding coming several weeks after that.
  • If you receive the EIDL, you will not be eligible for the SBA 7(a) Relief Loan


SBA 7(a) Relief Loans (PROPOSED, NOT YET LAW, as of 3/24/2020)
  • Apply through Fountainhead (click here)
  • Loan amount up to $10,000,000
  • Single-digit interest rates (likely to be WSJ Prime + 2.75% - currently 6.00%) for SBA eligible borrowers and Not-For-Profit companies
  • Fully amortizing loan term of 10 years
  • Loan proceeds are only for payroll support including medical leave, costs related to health benefits, employee salaries, mortgage payments, rent, utilities, insurance, and any other debt payments incurred before 2/15/2020
  • Relief loans are not eligible for business acquisition, real estate purchase, or other typical 7(a) proceeds, but may be eligible for business debt refi's stay tuned
  • Borrower SBA Guarantee Fee will be waived
  • No prepayment penalties
  • We're anticipating an approval within a few days after the Keeping Workers Paid and Employed Act is passed, as long as all required documentation is submitted
  • If you receive the SBA 7(a) Relief Loan, you will not be eligible for the EIDL



Any ideas about credit restrictions? Will they underwrite on personal or business credit? I own a credit repair company and we also help small businesses establish and build their own business credit. We have had a lot of clients asking these questions. I know normal SBA loans have a fairly high personal credit threshold. If they do, then it would keep many small biz owners from getting this relief.
southtexasag
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What kind of credit profile do I need to borrow?
The main underwriting standards for eligibility will be proof of payroll costs, and will be significantly relaxed compared with 7(a) loans issued during typical times, according to Senate staffers who helped draft the legislation. Trade groups and lenders expect the SBA to release detailed guidelines in coming days on underwriting and application criteria.

https://www.wsj.com/articles/how-to-apply-for-small-business-loans-under-the-coronavirus-stimulus-bill-11585235059
LOYAL AG
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Redassag94 said:

southtexasag said:

This is the info that I have found on it:

The Differences between the SBA disaster Loan and the SBA Relief Loan


Economic Injury Disaster Loan (EIDL)
  • Apply through the SBA (click here)
  • Loan amount up to $2,000,000
  • 3.75% interest rate for For-Profit companies
  • 2.75% interest rate for Not-For-Profit companies
  • Loan term not to exceed 30 years
  • Only available in states with SBA approved declarations of disaster (As of 3/20/2020 Alabama, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Virginia, West Virginia, Washington, Wisconsin, Wyoming, and Utah) This is the most current data we could find and continues to evolve.
  • We understand there are currently over 25,000 applications submitted with at least 3-week approval times. As the number of applications grow, it is anticipated the approval times will be pushed out longer with funding coming several weeks after that.
  • If you receive the EIDL, you will not be eligible for the SBA 7(a) Relief Loan


SBA 7(a) Relief Loans (PROPOSED, NOT YET LAW, as of 3/24/2020)
  • Apply through Fountainhead (click here)
  • Loan amount up to $10,000,000
  • Single-digit interest rates (likely to be WSJ Prime + 2.75% - currently 6.00%) for SBA eligible borrowers and Not-For-Profit companies
  • Fully amortizing loan term of 10 years
  • Loan proceeds are only for payroll support including medical leave, costs related to health benefits, employee salaries, mortgage payments, rent, utilities, insurance, and any other debt payments incurred before 2/15/2020
  • Relief loans are not eligible for business acquisition, real estate purchase, or other typical 7(a) proceeds, but may be eligible for business debt refi's stay tuned
  • Borrower SBA Guarantee Fee will be waived
  • No prepayment penalties
  • We're anticipating an approval within a few days after the Keeping Workers Paid and Employed Act is passed, as long as all required documentation is submitted
  • If you receive the SBA 7(a) Relief Loan, you will not be eligible for the EIDL



Any ideas about credit restrictions? Will they underwrite on personal or business credit? I own a credit repair company and we also help small businesses establish and build their own business credit. We have had a lot of clients asking these questions. I know normal SBA loans have a fairly high personal credit threshold. If they do, then it would keep many small biz owners from getting this relief.
The way I read the Payroll Protection Program which has replaced the 7(a) program in the second part of your email there's not really any underwriting. You're basically proving you have a business and employees and you can't pay them because of this mess and that this loan will allow you to pay them while things sort themselves out. You're dealing with the bank who is getting a 100% guarantee from the SBA with no threat of charge back or penalty as long as the paperwork is done right. Topping it all off the loan is forgiven as long as you're able to show you used it for payroll and/or a couple of other approved expenses. There's really no incentive to do underwriting from anyone's perspective.
 
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