Gensburg Calandriello & Kanter, P.C. continues to be committed to providing you with updates on the evolving government legislation and programs enacted in response to COVID-19. Small and local businesses have been some of the hardest hit by COVID-19, bringing ensuing work interruptions and forced-closures. The U.S. Small Business Administration (“SBA”) has a variety of loans and programs specifically targeted towards providing relief and assistance to small businesses.

As mentioned in our Friday, March 20, 2020 email, the SBA received funding from the Coronavirus Preparedness and Response Supplemental Appropriations Act to use towards Economic Injury Disaster Loans (EIDLs). Since our March 20th email, business owners in Illinois and all other U.S. states and territories are now eligible to apply for EIDLs. While EIDLs are a direct response to COVID-19, the SBA has numerous loans and programs which are always available to qualifying businesses.

If your business has been negatively impacted by COVID-19 we encourage you to contact us to discuss a plan to mitigate any damages suffered as a result of COVID-19.

SBA Emergency Loan

Economic Injury Disaster Loans (EIDLs)

EIDLs are designed to provide relief to small businesses, private non-profit organization of any size, small agricultural cooperatives and small aquaculture enterprises which have been negatively impacted by COVID-19 and, as a result, are unable to meet their obligations and pay ordinary and necessary operating expenses. Proceeds from EIDLs are to be used as working capital to help the business survive until normal operations resume.

Applications must be submitted by December 21, 2020, at: https://www.sba.gov/funding-programs/disaster-assistance.  Below is a short summary of the terms and restrictions to obtaining an EIDL.

  • Amount: SBA may loan up to $2,000,000. However, the amount will be limited to the amount of the economic injury determined by SBA, less business interruption insurance and other recoveries up to the administrative lending limit. If a business is a major source of employment, SBA has the authority to waive the $2,000,000 statutory limit.
  • Interest rate: The max interest rate is 3.75%
  • Term: Up to thirty (30) years
  • Application Requirements:
    • Credit History
    • Repayment Ability
    • Collateral (for loans over $25,000)
  • Restrictions:
    • May not be eligible if applicants have not complied with terms of previous SBA Loans.
    • Cannot be used to refinance long-term debts.
    • SBA may require applicants to obtain and maintain appropriate insurance.

Other SBA Loans

SBA offers numerous loans to small businesses to address a variety of needs. Additional information is available at: https://www.sba.gov/funding-programs/loans.

7(a) Program Loans

  • Summary: All-inclusive loans of up to $5,000,000 by lending partnership for eligible small businesses within the United States.
  • Eligibility Requirements: Registered as a for-profit business; business owner is not on parole; fewer than 500 employees; less than $7.5 million revenue on average each year for the past three years; net income after taxes and not counting carry-over losses must be under $5 million; tangible net worth must be less than $15 million; invested equity; proof of sound business purpose; fully exhausted non-SBA loan options; show not delinquent on any existing debts to U.S. government (taxes, student loans).
  • Uses: Working capital; expansion/renovation; new construction; purchase of land or buildings; purchase of equipment, fixtures; lease-hold improvements; refinancing debt for compelling reasons; seasonal line of credit; inventory; or starting a business.

Express Loan Program

  • Summary: Loans up to $350,000 for no more than 7 years with option to revolve. Applications are approved or denied within 36 hours of submittal. Recipients may use proceeds from loan for same purposes as 7(a) program loans.

Community Advantage Loan

  • Summary: Pilot program that allows mission-based lenders to assist small businesses in underserved markets with loans for up to $250,000. Uses are same as 7(a) Program.

504 Loan Program

  • Summary: Designed to foster economic development and job creation and/or retention. The eligible use of proceeds is limited to the acquisition or eligible refinance of fixed assets.

Microloan Program

  • Summary: Involves making loans through nonprofit lending organizations to underserved markets. Authorized use of loan proceeds includes working capital, supplies, machinery & equipment, and fixtures (does not include real estate).
  • Amount: Maximum loan amount is $50,000 with average loan size of $14,000.

SBA Exporting Assistance

            SBA Exporting Assistance is available to U.S. small businesses that export directly overseas, or those that export indirectly by selling to a customer that then exports their products. (https://www.sba.gov/content/export-assistance)

Export Express Loan

  • Summary: Financing up to $500,000 for businesses that need quick access to capital. Business can apply for a line of credit or a term note prior to finalizing an export sale or while purchasing opportunities overseas, such as identifying new overseas customer should an export sale be lost due to COVID-19.

Export Working Capital

  • Summary: Enables small businesses to fulfill export orders and finance international sales by providing revolving lines of credit or transaction-based financing of up to $5,000,000. For example, business could us the loan to obtain or retain overseas customers by offering attractive payment terms.

International Trade

  • Summary: Loan program to help small businesses engaged in international trade to retool or expand to better compete and react to changing business conditions. It can also help exporting firms to expand their sales to new markets or to re-shore operations back to the United States.

SBA Government Contracting

SBA is focused on assisting with the continuity of operations for small business through government contracting programs. (https://www.sba.gov/federal-contracting)

8(a) Business Development Program

  • Summary: Designed to level the playing field for small businesses owned by socially and economically disadvantaged people or entitles. The government limits competition for certain contracts to businesses that participate in the 8(a) program. The 8(a) program offer and acceptance process is available nationwide.
  • Qualifications:
    • Be a small business;
    • Not already have participated in the 8(a) program;
    • Be at least 51 percent owned and controlled by U.S. Citizens who are economically and socially disadvantaged;
    • Be owned by someone whose personal net worth is $250,000 or less;
    • Be owned by someone whose average adjusted gross income for three years is $250,000 or less;
    • Be owned by someone with $4 million or less in asset;
    • Have the owner manage that day-to-day operations and also make long-term decisions;
    • Have all its principals demonstrate good character; and
    • Show potential for success and be able to perform successfully on contracts.

HUBZone Program

  • Summary: Program limits competition for certain contracts to businesses in historically underutilized business zones. It also gives preferential consideration to those businesses in full and open competition. Joining HUBZone program makes a business eligible to compete for the program’s set-aside contracts. HUBZone-certified businesses also get a 10% price evaluation preference in full and open contract competitions.
  • Qualifications:
    • Be a small business;
    • Be at least 51 percent owned and controlled by U.S. citizens, a Community Development Corporation, an agricultural cooperative, a Native Hawaiian organization, or an Indian tribe;
    • Have its principal office located in a HUBZone; and
    • Have at least 35 percent of its employees live in a HUBZone.

Women-Owned Small Business

  • Summary: Federal government’s goal is to award at least 5% of all federal contracting dollars to women-owned small businesses each year.
    • Changes to program going into effect summer 2020. Self-certification as a women-owned business will no longer be an option, and business owners will have to either certify through an approved third-party entity or go through SBA’s online certification.
  • Qualifications:
    • Be a small business;
    • Be at least 51% owned and controlled by women who are US citizens; and
    • Have women manage day-to-day operations and also make long-term decisions.
  • Additional qualifications to qualify as an economically disadvantaged business within women’s contracting program:
    • Meet all requirements of the women’s contracting program;
    • Be owned and controlled by one or more women, each with a personal net worth less than $750,000;
    • Be owned and controlled by one or more women, each with $350,000 or less in adjusted gross income averaged over the previous three years; and
    • Be owned and controlled by one or more women, each $6 million or less in personal assets.

Concluding Remarks

Gensburg Calandriello & Kanter, P.C. continues to monitor the ever-changing situation and programs on a daily basis and is well equipped to assist you in managing your legal needs in this difficult period. Contact us with any questions or concerns you may have.

Alexis Clinebell
[email protected]