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Applying for an SBA Loan – Episode 225

SBA loan

IRA Financial’s Adam Bergman discusses his experiences applying for the SBA loans available to small business owners due to the CARES Act.

As a small business owner, Mr. Bergman has filed for the SBA loans available to him. In his latest podcast, he discusses these loans and how the process works. With so many businesses closed due to the Covid-19 pandemic, many business owners are looking at ways to recoup the losses they are seeing. These loans are one way the government is trying to help out.

Available SBA Loans

There are two loans we will focus on: the Paycheck Protection Program and the Economic Injury Disaster loans.

Paycheck Protection Program

This loan is available to small businesses with less than 500 employees. This loan will go through your bank. The loan is also available to the self-employed. The purpose of this loan is to help offset the costs of having a business that has been shutdown because of the coronavirus. Most importantly, as the name suggests, is to pay your employees. The loan may also be used to pay other business-related expenses, such as utilities, mortgage/rent and interest.

Your business may receive up to $10 million or two and one half times the amount of your average monthly payroll, whichever is less. Your business must have been open prior to February 15, 2020 to qualify. Lastly, loan forgiveness is available assuming you 75% for payroll expenses.

Economic Injury Disaster Loans

This loan comes directly from the Small Business Association. Again, this loan is available to those with less than 500 employees. The funds can be used to pay payroll, fixed debts, accounts payable and other business expenses. The interest rate of the loan will be 3.75% with a $10,000 loan advance and a 30 year term for up to around $1m. Payments and interest will be deferred for at least six months, but not longer than a year.

The rates are very generous, and so long as you use the funds for the intended purposes, the SBA will have no recourse for failure to repay the loan. Most penalties (like prepayment) and fees are waived.

Adam Bergman’s Experience

The first thing you need to do for the payroll protection loan is to ensure your bank is part of the program. You need to get in touch with them immediately to get the ball rolling. You will need to provide proof of your payroll expenses for the last year. The bank will figure out how much you will be eligible to receive.

The disaster loan goes directly through the SBA and is a fairly simple form that needs to be completed. As we mentioned, you could receive a $10,000 advance to keep you afloat in the short term. You may apply directly on their website.

Bear in mind, both your bank and especially the SBA, will be dealing with countless number of requests. We know how banks work…generally, they take their time to ensure everything is correct. There probably will be a wait before everything is submitted and checks starting going out. As always, patience is a virtue!

Conclusion

The Covid-19 pandemic has hit everyone across the globe. These SBA loans are available to help small business owners throughout America. This is in addition to the stimulus checks being sent out and expanded unemployment benefits. The CARES Act also allows more liberal use of retirement funds to deal with this crisis. It seems like more money will be on the way if you missed out on the first round of loans.

Thanks for listening to Adam Talks. We hope Me. Bergman has shed some light about the loans available to small business owners. Be sure to check out all our podcasts on our SoundCloud page.

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