Economic Injury Disaster Loans

Summary of the Economic Injury Disaster Loans  March 24, 2020

This document is based on information available as of the date of the document.  As additional guidance is issued, this document will be updated.  Please check back for the most up to date information.

Note:  we are familiar with the process and can assist you with the application.  Please call your Kirsch CPA relationship manager for more information or for assistance with the application process.

In response to COVID-19 pandemic sweeping the country, the U.S. Small Business Administration is allowing small businesses and nonprofits to apply for low-interest, long-term loans of up to $2 million through the Economic Injury Disaster Loan Program.

The program applies to all small businesses and most private non-profits. Ineligible business includes public non-profits, religious-based organizations, casinos and other gambling enterprises, and agricultural enterprises.

The criteria for loan approval are:

• Applicants must have a credit history that the SBA deems acceptable.
• SBA must determine there will be an ability to repay the loan.
• The business must be in a declared county and suffered working capital losses due to COVID-19.

The details:

• Eligible entities may qualify for loans up to $2M with terms up to 30 years. The interest rates are 3.75% for small businesses and 2.75% for non-profits.
• Loan funds can be used to pay fixed debts, payroll, accounts payables and other operating expenses. These loans are not meant to replace sales, be used for expansion, or to refinance existing debt.
• For loans under $25,000, they are unsecured. Over $25,000 will be secured.

1. 1. –  They will take a lien on all available collateral (business and personal) regardless of lien position or if there is equity in the assets.
   2. –  They won’t decline a loan for lack of collateral. The loan approval is based on cash flow and ability to meet payment obligations.
   3. –  Personal Guarantee will apply for greater than 20% owners.

• There is a 11-month deferment on payments from the date you sign the note. If you execute the note on April 1, 2020, your first payment will be due April 1, 2021.
• General guidelines suggest the maximum loan will be 50% of gross profit from the last completed tax return.

What’s required:

• Apply at  https://www.sba.gov/funding-programs/disaster-assistance
• Complete SBA loan application – Form 5 (business entities) or 5c (sole proprietors).
• Completed IRS Form 4506T for the applicant business and any greater than 20% owners.
• Completed copies of the most recent Federal Income Tax Return. If this is not yet available, a balance sheet and profit and loss for the most recent year need to be submitted.
• An interim 2020 Profit and Loss and Balance Sheet.
• Completed SBA Form 2202 – Schedule of Liabilities.
• Completed SBA Form 413 – Personal Financial Statement for greater than 20% owners.
• Completed SBA Form 1368 – Monthly sales figures.