CARES ACT – How to Apply

Our firm advises and assists businesses with applying for relief via the U.S. Small Business Association (“SBA”) ‘s Economic Injury Disaster Loan Program.

If you seek advice on how to apply or how to evaluate existing options, you may contact us for more information.

The SBA has a dedicated site for updated links and resources.

The federal government will soon release details including a list of lenders offering loans under the program, but the below information and guides can help you prepare what information you need:

Here is a summary checklist: Chamber of Commerce Emergency Loans Small Business Guide and Checklist

Application Links

Here are some key links:

I. To apply for a Disaster Assistance Loan

The new law provides opportunity to receive up to a $10,000 Advance on an Economic Injury Disaster Loan (EIDL) for emergency capital. The SBA is updating their system to implement this provision so small businesses can request an EIDL advance when they apply for the loan. This update will be available in the coming days. In the interim period, you can still apply for a full Economic Injury Disaster Loan, but will need to reapply for the Advance when the system is updated with a streamlined application. Once updated, the Advance will be included in your EIDL application process.

The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million dollars.

Here is the the SBA’s description of the U.S. Small Business Administration DISASTER BUSINESS LOAN APPLICATION

The Following Forms must be submitted:

• This application (SBA Form 5), completed and signed
• Tax Information Authorization (IRS Form 4506T), completed and signed by each applicant, each principal owning 20 percent or more of the applicant business, each general partner or managing member; and, for any owner who has greater than 50 percent ownership in an affiliate business. Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management
• Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business; an explanation if not available
• Personal Financial Statement (SBA Form 413) completed, signed, and dated by the applicant, each principal owning 20 percent or more of the applicant business, and each general partner or managing member
• Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used)

Other documents possibly required. (Be prepared to provide within 7 days if requested)

• Complete copy, including all schedules, of the most recent Federal income tax return for each principal owning 20 percent or more, each general partner or managing member, and each affiliate when any owner has more than 50 percent ownership in the affiliate business.
  • Affiliates include, but are not limited to, business parents, subsidiaries, and/or other businesses with common ownership or management
• If the most recent Federal income tax return has not been filed, a year-end profit-and-loss statement and balance sheet for that tax year
• A current year-to-date profit-and-loss statement.
• Additional Filing Requirements (SBA Form 1368) providing monthly sales figures for will generally be required when requesting an increase in the amount of economic injury

Further additional forms may be requested:

• Fee Disclosure Form and Compensation Agreement (Form 159D)
• Additional Filing Requirements (SBA Form 1368)

Requirements for Home / Sole Proprietor Loans are slightly different but the application can be found here:

• S. Small Business Administration DISASTER HOME / SOLEPROPRIETOR LOAN APPLICATION

You can upload your loan documents directly to the same page.

II.  To apply for a loan under the Express Bridge Loan Pilot Program.

Here is the the SBA’s description of  Express Bridge Loan Pilot Program.

Updated March 25, 2020, this program is meant to supplement disaster relief with expedited $25,000 loans for small businesses, now expanded to all businesses affected by COVID-19 through March 13, 2021. See the full guide to the program in this link.

• Some required terms and conditions:
  • The Lender must certify on the SBA Form 1920, “Lender’s Application for Loan Guaranty,” that the EBL applicant does not have the ability to obtain some or all of the requested loan funds on reasonable terms from non-Federal sources, including the Lender, without SBA assistance, and requires the Lender to fully document the basis for that determination in its loan file.
  • Lender must document in the credit memorandum that the EBL applicant had an operating business as of March 13, 2020 and that the applicant has demonstrated that it has been adversely impacted by the COVID-19 emergency.
  • Maximum guaranty percentage. For an EBL loan, the SBA guaranty percentage is limited to the maximum guaranty percentage for SBA Express loans. The guaranteed amount of an EBL loan will count towards the maximum SBA exposure that may be outstanding for all SBA loans to a borrower and its affiliates at any one time.
  • For the COVID-19 Emergency Declaration, EBL loan proceeds must be used exclusively to support the survival and/or reopening of the small business.
• Because the process is streamlined, Lenders may only consider the following:
  • Credit scores
    • SBSS Score:
      • The minimum acceptable SBSS Score for an EBL loan applicant is 130, but the SBA may adjust this score up or down from time to time.
    • Personal Credit Scores
      • Lender must obtain a personal credit score for each guarantor.
    • IRS Tax Transcript or Equivalent
      • Lender must submit a signed IRS Form 4506-T to the Internal Revenue Service (IRS) and obtain an IRS tax transcript for the EBL applicant business for the purpose of verifying the existence of the business as of the date the applicable disaster commenced and confirming that the EBL applicant has filed required tax returns.
    • Existing Banking Relationship
      • the Lender must have an existing banking relationship with the EBL applicant as of the date of the applicable disaster in order to help mitigate the risks associated with the streamlined underwriting process under the EBL Pilot Program. The Lender must document this existing banking relationship in the credit memorandum
      • A relationship with any of the Lender’s affiliates will not satisfy this requirement.
    • Required Forms for the Express Bridge Loan Pilot Program
      • SBA Form 1920. Lender must complete and sign SBA Form 1920, “Lender’s Application for Loan Guaranty.”
      • SBA Form 1919. EBL Applicants and their Associates must complete and sign SBA Form 1919, “Borrower Information Form.”
      • SBA Form 159. If the EBL applicant paid or committed to pay an application fee to the Lender, then an SBA Form 159 must be fully completed and signed by the EBL applicant and the Lender. See also, Section VI.L. above.
      • SBA Form 601. For any EBL loan where proceeds will be used for construction of more than $10,000, as indicated on SBA Form 1920, the EBL applicant and contractor must execute SBA Form 601, “Applicant’s Agreement of Compliance.” The Lender must keep the original signed SBA Form 601 in its loan file. The Lender does not send the form to SBA.
      • IRS Form 4506-T and IRS Transcript or Equivalent. As discussed above, the Lender must submit a signed IRS Form 4506-T and obtain an IRS Transcript or equivalent prior to any disbursement of EBL loan proceeds.

F. SBA Form 912. If any EBL loan applicant or Associate answers “yes” to questions 18 and/or 19 on SBA Form 1919, “Borrower Information Form,” the Lender must obtain the required SBA Form 912, “Statement of Personal History,” and follow the steps outlined in SOP 50 10 prior to submitting the request for an EBL loan number.

III.  Paycheck Protection Loans

On March 31, 2020, the U.S. Department of the Treasury and the Small Business Administration (SBA) released the application form for businesses to apply for and obtain loans under the Paycheck Protection Program. This program, established under the CARES Act, provides $349 billion for small business loans to cover qualified payroll costs, rent, utilities, and interest on mortgage and other debt obligations. To obtain a loan, a qualifying small business should submit an application through an SBA- and Treasury- approved bank, credit union, or nonbank lender.

The SBA has posted a sample application form.

The SBA also has posted an information sheet for borrowers.

IV.  Access to Capital

For more information on SBA loans or how to connect with a lender, visit: https://www.sba.gov/funding-programs/loans.